The J-Curve Effect on the Trade Balance in Armenia

Gevorg Grigoryan

doi:doi:10.11648/j.ijefm.20150303.23

| Peer-Reviewed |

The J-Curve Effect on the Trade Balance in Armenia

Gevorg Grigoryan

Received: 27 April 2015 Accepted: 11 May 2015 Published: 23 May 2015

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

Over the past years the Armenian Dram has appreciated against their major trading partners’ currencies. Such appreciation has received mixed reactions. Some economists argue that the depreciation of currencies is a good stimulant for export growth, while others argue that the net benefits of depreciation cannot outweigh its ills on the economy. The purpose of this paper is to investigate the effects of depreciation on the trade balance of Armenia using vector error correction model (VECM) and to trace the response of the trade balance to the shocks in the exchange rate using Impulse response function. This study finds evidence of the J-curve on the Armenian trade balance and the existence of a long-run equilibrium relationship among the variables. This suggests that following a real depreciation the trade balance will initially deteriorate, but will improve in the long run.

DOI	10.11648/j.ijefm.20150303.23
Published in	International Journal of Economics, Finance and Management Sciences (Volume 3, Issue 3, June 2015)
Page(s)	270-278
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Armenia, J-Curve, Exchange Rate, Trade Balance, VECM

References

[1]	Al Shehabi, O. and Ding, Sh. (2008). Estimating Equilibrium Exchange Rates for Armenia and Georgia, IMF Working Paper, 110.
[2]	Armenia economic report (2010). The necessity of economic diversification and export expansion, Ministry of Economy of the Republic of Armenia.
[3]	Bahmani-Oskooee, M. (2004). The J-Curve: A Literature Review. Journal of Applied Economics, 36, 1377-1398.
[4]	Bahmani-Oskooee, M. and Jehanzeb, Ch. (2009). Short run and long-run effects of currency depreciation on the bilateral trade balance between Pakistan and her major trading partners. Journal of economic development,34.
[5]	Bahmani-Oskooee, M. and Swarnjit, A. (2003). Bilateral J-Curve Between India and her Trading Partners. Journal of Applied Economics, 35, 1037-1041.
[6]	Bahmani-Oskooee, Mohsen, and Ali M. Kutan (2007). The J-Curve in the Emerging Economies of Eastern Europe. The International Trade Journal, 19,165–178.
[7]	Bredin, D.,Fountas, S. and Murphy E.(2003). International Review of Applied Economics, 17, 2.
[8]	De Silva, D. G., and Zhu, Z. (2004). Sri Lanka’s Experiment with Devaluation: VAR and ECM Analysis of Exchange Rate Effects on Trade Balance and GDP. The International Trade Journal, 18 (4), 269-301.
[9]	Dickey, D. A. and Fuller, W. A. (1979) Distributions of the estimators for autoregressive time series with a unit root, jounal of the American Statistical Association, 74, 427.
[10]	Enders, E. (2004). Applied Econometric Time Series (2nd edition) New Jersey: John Wiley & Sons.
[11]	Grigoryan, V. and Dallakyan, A. (2003). Equilibrium real exchange rate model of Armenia, Working paper of Central bank of Armenia.
[12]	Gupta-Kapoor, A. and Ramakrishna, U. (1999). Is There a J-curve? A New Estimation for Japan. International Economic Journal,13 (4), 71-19.
[13]	Hacker, R. Scott, and Abudlnasser, Hatemi-J. (2004). The Effect of Exchange Rate Changes on the Trade Balance in the Short and Long Run: Evidence from German Trade and Transitional Central European Economies. Journal of Economics of Transition, 12(4), 777-799
[14]	Hsing, Han-Min (2005). Re-examination of J-Curve Effect for Japan, Korea and Taiwan. Japan and the World economy, 2 (17), 43-58.
[15]	Johansen, S. (1995). Likelihood–Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.
[16]	M. Abimbola Oyinlola, Oluwatosin Adeniyi and Olusegun Omisakin (2010). Responsiveness of Trade Flows to Changes in Exchange rate and Relative prices: Evidence from Nigeria. International Journal of Economic Sciences and Applied Research 3 (2): 123-141
[17]	Narayan Paresh (2004). New Zealand’s Trade Balance: Evidence of the J-Curve and Granger Causality. Applied Economics Letters, 11, 351-354.
[18]	Narayan, Paresh. K., and Narayan, Seema (2004). The J-Curve: Evidence from Fiji. International Review of Applied Economics, 18 (3), 369-380.
[19]	Pesaran, M. H. Y. Shin and Smith, R. J. (2iJ01) Bounds testing approaches to the analysis of level relationships, journal of Applied Econometrics. 16, 289-326.
[20]	Petrovic, P. and Grigoric, M. (2010). Exchange Rate and Trade Balance: J-curve Effect, Panaeconomicus,1, 23-41.
[21]	Rabeya, Kh. and Rahman M. M. (2009). Assessing the Existence of the J-Curve Effect in Bangladesh, The Bangladesh Development Studies,32 , 2.
[22]	Rose, A. K. (1990) Exchange rates and the trade balance: some evidence from developing countries economic letters, 3, 271-275.
[23]	Rose, Andrew, and Janet Yellen (1989). Is There a J-Curve. Journal of Monetary Economics, 24, 53-68.
[24]	Tarlok Singh (2004). Testing J-Curve Hypothesis and Analyzing the Effect of Exchange Rate Volatility on the Balance of Trade in India. Empirical Economics, 29, 227-245.

Cite This Article

Plain Text BibTeX RIS

APA Style

Gevorg Grigoryan. (2015). The J-Curve Effect on the Trade Balance in Armenia. International Journal of Economics, Finance and Management Sciences, 3(3), 270-278. https://doi.org/10.11648/j.ijefm.20150303.23

Copy | Download

ACS Style

Gevorg Grigoryan. The J-Curve Effect on the Trade Balance in Armenia. Int. J. Econ. Finance Manag. Sci. 2015, 3(3), 270-278. doi: 10.11648/j.ijefm.20150303.23

Copy | Download

AMA Style

Gevorg Grigoryan. The J-Curve Effect on the Trade Balance in Armenia. Int J Econ Finance Manag Sci. 2015;3(3):270-278. doi: 10.11648/j.ijefm.20150303.23

Copy | Download

@article{10.11648/j.ijefm.20150303.23,
  author = {Gevorg Grigoryan},
  title = {The J-Curve Effect on the Trade Balance in Armenia},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {3},
  number = {3},
  pages = {270-278},
  doi = {10.11648/j.ijefm.20150303.23},
  url = {https://doi.org/10.11648/j.ijefm.20150303.23},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20150303.23},
  abstract = {Over the past years the Armenian Dram has appreciated against their major trading partners’ currencies. Such appreciation has received mixed reactions. Some economists argue that the depreciation of currencies is a good stimulant for export growth, while others argue that the net benefits of depreciation cannot outweigh its ills on the economy. The purpose of this paper is to investigate the effects of depreciation on the trade balance of Armenia using vector error correction model (VECM) and to trace the response of the trade balance to the shocks in the exchange rate using Impulse response function. This study finds evidence of the J-curve on the Armenian trade balance and the existence of a long-run equilibrium relationship among the variables. This suggests that following a real depreciation the trade balance will initially deteriorate, but will improve in the long run.},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - The J-Curve Effect on the Trade Balance in Armenia
AU  - Gevorg Grigoryan
Y1  - 2015/05/23
PY  - 2015
N1  - https://doi.org/10.11648/j.ijefm.20150303.23
DO  - 10.11648/j.ijefm.20150303.23
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 270
EP  - 278
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20150303.23
AB  - Over the past years the Armenian Dram has appreciated against their major trading partners’ currencies. Such appreciation has received mixed reactions. Some economists argue that the depreciation of currencies is a good stimulant for export growth, while others argue that the net benefits of depreciation cannot outweigh its ills on the economy. The purpose of this paper is to investigate the effects of depreciation on the trade balance of Armenia using vector error correction model (VECM) and to trace the response of the trade balance to the shocks in the exchange rate using Impulse response function. This study finds evidence of the J-curve on the Armenian trade balance and the existence of a long-run equilibrium relationship among the variables. This suggests that following a real depreciation the trade balance will initially deteriorate, but will improve in the long run.
VL  - 3
IS  - 3
ER  -

Copy | Download

Author Information

Gevorg Grigoryan

Shanghai University of Finance & Economics, School of Finance, Shanghai, China

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Gevorg Grigoryan. (2015). The J-Curve Effect on the Trade Balance in Armenia. International Journal of Economics, Finance and Management Sciences, 3(3), 270-278. https://doi.org/10.11648/j.ijefm.20150303.23

Copy | Download

ACS Style

Gevorg Grigoryan. The J-Curve Effect on the Trade Balance in Armenia. Int. J. Econ. Finance Manag. Sci. 2015, 3(3), 270-278. doi: 10.11648/j.ijefm.20150303.23

Copy | Download

AMA Style

Gevorg Grigoryan. The J-Curve Effect on the Trade Balance in Armenia. Int J Econ Finance Manag Sci. 2015;3(3):270-278. doi: 10.11648/j.ijefm.20150303.23

Copy | Download

@article{10.11648/j.ijefm.20150303.23,
  author = {Gevorg Grigoryan},
  title = {The J-Curve Effect on the Trade Balance in Armenia},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {3},
  number = {3},
  pages = {270-278},
  doi = {10.11648/j.ijefm.20150303.23},
  url = {https://doi.org/10.11648/j.ijefm.20150303.23},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20150303.23},
  abstract = {Over the past years the Armenian Dram has appreciated against their major trading partners’ currencies. Such appreciation has received mixed reactions. Some economists argue that the depreciation of currencies is a good stimulant for export growth, while others argue that the net benefits of depreciation cannot outweigh its ills on the economy. The purpose of this paper is to investigate the effects of depreciation on the trade balance of Armenia using vector error correction model (VECM) and to trace the response of the trade balance to the shocks in the exchange rate using Impulse response function. This study finds evidence of the J-curve on the Armenian trade balance and the existence of a long-run equilibrium relationship among the variables. This suggests that following a real depreciation the trade balance will initially deteriorate, but will improve in the long run.},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - The J-Curve Effect on the Trade Balance in Armenia
AU  - Gevorg Grigoryan
Y1  - 2015/05/23
PY  - 2015
N1  - https://doi.org/10.11648/j.ijefm.20150303.23
DO  - 10.11648/j.ijefm.20150303.23
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 270
EP  - 278
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20150303.23
AB  - Over the past years the Armenian Dram has appreciated against their major trading partners’ currencies. Such appreciation has received mixed reactions. Some economists argue that the depreciation of currencies is a good stimulant for export growth, while others argue that the net benefits of depreciation cannot outweigh its ills on the economy. The purpose of this paper is to investigate the effects of depreciation on the trade balance of Armenia using vector error correction model (VECM) and to trace the response of the trade balance to the shocks in the exchange rate using Impulse response function. This study finds evidence of the J-curve on the Armenian trade balance and the existence of a long-run equilibrium relationship among the variables. This suggests that following a real depreciation the trade balance will initially deteriorate, but will improve in the long run.
VL  - 3
IS  - 3
ER  -

Copy | Download