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The S ‐Curve at the Industry Level: Evidence from US–Australia Trade *
Author(s) -
BahmaniOskooee Mohsen,
Ratha Artatrana
Publication year - 2011
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/j.1759-3441.2011.00134.x
Subject(s) - economics , depreciation (economics) , liberian dollar , balance of trade , currency , econometrics , exchange rate , value (mathematics) , balance (ability) , demand curve , function (biology) , international economics , monetary economics , statistics , microeconomics , mathematics , finance , profit (economics) , medicine , evolutionary biology , financial capital , capital formation , physical medicine and rehabilitation , biology
Short‐run response of the trade balance to currency depreciation is summarised by the J ‐Curve or S ‐Curve. While the J ‐Curve relies upon regression analysis applied to a trade balance model, the S ‐Curve relies upon cross‐correlation function between the exchange rate and past as well as the future values of the trade balance. All past studies that have analysed response of Australian trade balance to changes in the real value of the Australian dollar have estimated the J ‐Curve with not much support for it. In this paper, we rely upon the S ‐Curve phenomenon constructed for 146 industries that trade between the United States and Australia. The S ‐Curve hypothesis receives support in 89 of the 146 industries providing a breakthrough in this part of the literature.