Currency fluctuations and the French-U.S. trade balance: Evidence from 118 industries

Mohsen Bahmani-Oskooee, Hanafiah Harvey, Scott W. Hegerty

Research output: Contribution to journalArticlepeer-review

Abstract

The impact of currency depreciations on trade has inspired a large body of research. Recent studies have examined industry-level trade, often using cointegration analysis, finding that a significant fraction of industries respond positively to devaluations. Oftentimes, adjustment lags result in a "J curve" effect, where devaluations hurt the trade balance temporarily. This study examines the specific case of trade between the United States and France, but finds that these flows are less sensitive than has been shown for other country pairs. Only 30 of 118 industries see increased trade balances after a dollar depreciation, and virtually none follow any type of a "J curve." Certain industry sectors are more sensitive than others, however. Examining the SITC classifications of those 30 industries, we find that many of them are clustered in the SITC 700 (Machinery and Transport Equipment) and 800 (Miscellaneous Manufactured Articles) categories. In particular, clothing and footwear, as well as electrical equipment, are particularly affected.

Original languageEnglish (US)
Pages (from-to)237-257
Number of pages21
JournalEmpirica
Volume40
Issue number2
DOIs
StatePublished - May 1 2013

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development

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