Trade balance dynamics and exchange rates: in search of the J-curve using a structural gravity approach.

Harald Badinger, Aurélien Fichet de Clairfontaine

Publication: Scientific journalJournal articlepeer-review

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This paper uses a structural gravity approach, specifying currency movements as trade cost component to derive an empirical trade balance model, which
incorporates multilateral resistance terms and accounts for the cross‐country variation in the exchange rate pass‐through into import and export prices. The model is estimated using quarterly bilateral trade flows between 47 countries over the period 2010Q1 to 2017Q2, disaggregated into 97 commodity groups. Our results support the existence of an “aggregate” J‐curve, pooled over commodity groups; at the same time they point to considerable heterogeneity in the trade balance dynamics across industries below the surface of aggregate data.
Original languageEnglish
Pages (from-to)1268 - 1293
JournalReview of International Economics
Publication statusPublished - 2019

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502047 Economic theory
  • 502003 Foreign trade
  • 502018 Macroeconomics
  • 506004 European integration
  • 502025 Econometrics

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