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The J–Curve Phenomenon: Evidence from Commodity Trade Between South Africa and the United States

Previous studies on the J–curve phenomenon for South Africa have been carried out using either aggregate trade data between South Africa and the rest of the world or between South Africa and her major trading partners. The evidence of J-curve effects in South Africa’s bilateral trade have been mixed. In this paper, we revisit this issue by examining the short- and long-run effects of exchange rate changes on trade flows in the context of disaggregated industry data on bilateral trade between South Africa and the United States. From estimates of trade balance models using the autoregressive distributed lag (ARDL) approach, we find evidence of significant J-curve effects as a depreciation of the South African currency has favourable short-run effects on trade balance for 8 industries. These short-run effects last into the long-run in a quarter of the industries considered in the study. The results also show that income has significant long-run effects on trade flows in industries that account for almost 55% of trade flows between South Africa and the United States.

Working paper 777
1 April 2019
Related Journal

J.Stud.Econ.Econometrics,2019,43 (1)
1 April 2019
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