European Business Schools Librarian's Group
Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics
No 256: Trade Balance Dynamics and Exchange Rates: In Search of the J-Curve Using a Structural Gravity Approach
Harald Badinger () and Aurelien Fichét de Clairfontaine ()
Additional contact information
Harald Badinger: Department of Economics, WU (Vienna University of Economics and Business)
Aurelien Fichét de Clairfontaine: Department of Economics, WU (Vienna University of Economics and Business)
Abstract: 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 2010Q1-2017Q2, 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.
Keywords: Exchange Rate Variations, Gravity, J-curve, Trade Balance
JEL-codes: F12; F31; F32 January 2018
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