In recent years, research on the effects of currency movements on trade has used disaggregated data and error-correction and cointegration models. The resulting short-run and long-run estimates can be used to isolate not only specific industry responses, but also dynamic effects such as the "J curve." This study examines the United States' trade balance with Chile, both at the aggregate level and for 49 individual industries. Of the 40 cointegrated industries, only ten improve in the long run after a depreciation, and only nine exhibit the temporary deterioration and eventual improvement typical of a "J curve." We find that most effects concentrated among certain manufactures, with agricultural products and raw materials responding less to currency movements than do other commodities.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics