the j curve effect and the u s agricultural trade balance according to the j curve theory following a currency depreciation there will be an initial deterioration of the trade balance before an improvement is realized this paper finds empirical evidence indicating the first segment of the j curve does exist for the u s agricultural trade balance a 10 depreciation of the u s dollar is estimated to lead a deterioration of the agricultural trade balance that will last for about nine months

the effects of devaluation on the trade balance a critical view and re examination of mile s new results abstract in a often cited article miles 1979 claims to have shown empirically the validity of the global monetarist proposition that devaluations do not affect the balance of trade this paper first uses mile s own framework of analysis to reveal serious deficiencies in his methodology and tests that cast doubt on the validity of his results in a respecified trade balance equation we show that devaluations do affect the trade balance in the traditionally predicted direction the pivotal difference between the two specifications arises from our inclusion of relative price effects and longer lag structure for the exchange rate variable

sticky import prices and j curves we show that devaluations lead to a j curve when imported goods are durable and import prices adjust slowly to exchange rate changes the j curve effect is caused by intertemporal speculation as import prices are low relative to future prices immediately after a devaluation

devaluation and the j curve some evidence from ldcs within the international trade literature it is not uncommon to find arguments about whether devaluation will improve the trade balance it is argued that the flows of goods respond only with time lags to changes in the exchange rate the j curve terrn is used to describe the movement over time of the trade balance it may deteriorate at first and improvement may come later this paper presents a method by which one could detect the existence of the j curve the method is applied to four developing countries the empirical evidence supports the pattern of movemnent described by the j curve a major policy option for a country facing a persistent balance of payments deficit is said to be devaluation of its currency within the international trade literature it is not uncommon to find arguments about whether devaluation will improve the trade balance or the balance of payments for example proponents of the elasticities approach describe the necessary and sufficient conditions for an improvement in the trade balance in terms of elasticities of demand and supply referred to as the marshall lerner condition while there is abundant empirical evidence to suggest that these conditions are indeed met at least for industrial countries there have been circumstances under which 2 devaluation has not been successful for example one might wonder why the u s trade balance deteriorated so much in 1972 despite the devaluation of the dollar in 1971 this unfavorable effect of devaluation on the trade balance is termed the j curve phenomenon received for publication august 23 1984 revision accepted for publication november 26 1984 the university of wisconsin milwaukee i would like to thank two anonymous referees for their valuable comments on the initial draft of this paper 1 proponents of the absorption approach e g alexander 1952 describe how devaluation may change the terms of trade increase production and switch expenditures from foreign to domestic goods thus improving the trade balance international monetarists argue that devaluation reduces the real value of cash balances and or changes the relative price of traded and nontraded goods thus improving both the trade balance and the balance of payments 2 for an cstimate of the elasticities see houthakker and magee 1969 and warner and kreinin 1983 the former study provides the elasticities estimates under fixed exchange rates and the latter under floating rates this content downloaded from 157 55 39 17 on wed 31 aug 2016 04 39 37 utc all use subject to http about jstor org terms

nonlinear dynamics in deviations from the law of one price a broad based empirical study abstract in this paper we test empirically the validity of the law of one price using data for five major bilateral us dollar exchange rates and nine goods sectors during the recent floating exchange rate regime since the early 1970s using threshold autoregressive models we find strong evidence of nonlinear mean reversion in deviations from the law of one price with plausible convergence speeds consistent with theoretical arguments on international goods markets arbitrage under transactions costs and with an emerging strand of empirical literature these results contribute towards forming a consensus view in favor of discrete regime switching in deviations from the law of one price and the presence of differing nonzero transactions costs across a broad range of goods and countries

dynamics of the trade balance and the terms of trade in ldcs the s curve abstract in their analysis of the dynamic behavior of terms of trade and the trade balance backus kehoe and kydland found that the lead and lag correlation between these two variables is s shaped for a set of oecd countries furthermore they show that this s curve can be replicated by a two country dynamic general equilibrium model surprisingly the s curve also describes the dynamic relationship between terms of trade and the trade balance for a large set of ldcs this s curve can also be reproduced by a small open economy model which captures some important features of ldc economies the s curve is unexpectedly robust to variations in the key parameters of the model the model also captures the business cycle properties of the ldc data

impact of the terms of trade on the u s trade balance a reexamination the right conclusion could be that there is a strong connection between the spectral components with specified periods a possible economic interpretation could identify a strong long term in the sense of the specified periods connection between both series but that would still not allow us to say anything concerning the size and direction of the time delay between the two series for such an analysis we would have to at least consider the phase angles between the components because of the ambivalent meaning of the phase angle in relation to the direction and number of periods the final answer could come only from the time domain analysis however the fact that only spectral components with longer periods i e smaller frequencies show coherency suggests something else in order to influence the balance of trade the changes in the terms of trade should be durable enough mathematical formalization of this concept of durability would therefore be helpful i would propose that further research be done in this respect

macro economic shocks the erm and tri polarity the authors use the comparative behavior of real output growth and inflation behavior of members and nonmembers of the exchange rate mechanism erm to analyze the importance of erm membership on macroeconomic performance an econometric procedure for identifying temporary and permanent shocks to output is proposed and executed the results confirm that the erm has acted as a vehicle for macropolicy coordination between members the authors also investigate several issues relating to the hypothesis of global economic tri polarity between the united states germany and japan copyright 1995 by mit press

cointegration results of farm incomes and production costs in us agriculture this study analyses the dynamic relationships between farm incomes and production costs in the us agricultural industry by applying the cointegration technique the results provide evidence of long run equilibrium relationships between cash marketings and production costs however the results do not show such relationships between total revenues which include cash marketings and government payments and production costs chief conclusions of this study are that if market forces alone were to guide farmers decisions one could expert long run equilibrium relationships between the cash receipts and costs however government interventions seem to disrupt this equilibrium the results also suggest that production costs can be forecast using cash marketings which are found to be weakly exogenous the error correction model and vector autoregression model are used to estimate and compare simulation performances of the cointegrated system of cash marketings and production costs

the effect of protest votes on the estimates of wtp for use values of recreational sites contingent valuation studies are often characterized by a considerable number of protest responses which may cause selectivity bias on the final estimates for wtp sample selection models can detect and if necessary correct selectivity bias in economic applications where the relevant dependent variable is continuous sample selection models are generally estimated using heckman s 2 step method rather than the fiml estimator either method has its own drawback computational complexity for the fiml method susceptibility to collinearity problems for the 2 step method using data on valuation of forest resources for recreational use we analyse the performance of the two estimators in this application given the presence of some collinearity the fiml is preferred to the 2 step method a procedure is outlined to deal with selectivity problems in similar settings

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

determinants of international trade flows the case of developing countries abstract the question of magnitude and the time path of the trade flows to changes in the exchange rates and to changes in the price level is of emitent practical importance to assess the above proposition a distributed lag structure is imposed on the relative prices and on the effective exchange rate as the determinants of trade flows then import and export demand functions are estimated for a sample of developing countries using the almon procedure the empirical findings appeared to sustain orcutt s early conjecture that trade flows adjust differently to different price stimuli more precisely it was found that imports and exports reactions were quicker and the total response time was shorter when an exchange rate rather than relative prices caused a change in international prices

default correlation at the sovereign level evidence from some latin american markets using the eruption of argentina debt crisis in 2001 as a natural experiment we investigated the correlated default at the sovereign level for some latin american countries daily closing market quotes for sovereign credit default swaps cds of argentina brazil mexico and venezuela were obtained from credittrade database using copula approach we observed increased dependences among sovereign cds markets during the crisis period their dependence structures were found to be asymmetric moreover the degree of credit contagion was related to the creditworthiness of the country this study also discussed the implications of these findings for policymakers

making room for china in the world economy as it comes out of the crisis the world econ omy faces two apparently conflicting demands on the one hand achieving global macroeco nomic stability and preventing a protectionist backlash will require that we avoid large current account imbalances of the type that the world economy experienced in the run up to the cri sis on the other hand returning to rapid growth in the developing nations will require that they resume their conquest of global market share in tradable goods the challenge of meeting both demands is epitomized by the contentious us china bilat eral relationship american and european policy makers blame china for an undervalued renminbi which they argue is the root cause of china s huge trade surplus chinese leaders resist the pressure fearing that appreciation will undercut the competitiveness of chinese goods in world markets hurt exports and damage growth the western answer to this concern is that china needs to replace foreign demand with domestic demand as the engine of growth but if growth depends primarily on the sup ply of modern manufactured products and other tradables as opposed to services and non trad ables as i will argue here the chinese position has more force than critics give it credit the conventional fix for china s current account surplus consisting of a combination of expendi ture expansion and currency appreciation will shift the structure of the economy away from tradables and towards non tradables this may be good for macroeconomic balance in china and elsewhere but it will almost certainly have adverse effects on china s growth perhaps large enough even to endanger the country s social and political stability

the j curve a literature review due to lag structure currency devaluation is said to worsen the trade balance first and improve it later resulting in a pattern that resemble the letter j hence the j curve phenomenon since its introduction by magee in 1973 brooking papers on economic activity 1 pp 303 25 a large number of studies have attempted to test the phenomenon using different techniques and different model specifications the results are at best ambiguous and deserve to be collected together for the future generation of researchers and graduate students this paper fills such a vacuum in the literature by reviewing the j curve related empirical papers

is there a j curve abstract if the response of the value of the trade balance to movements in the real exchange rate is described by a j curve then a real depreciation initially worsens a balance of trade deficit only improving it over time this paper investigates whether a j curve can be detected in the last twenty five years of american data no statistically reliable evidence of a stable j curve is detected the model is checked extensively to support this finding

sources of fluctuations in real and nominal exchange rates this paper attempts to distinguish empirically real versus nominal sources of fluctuations in real and nominal exchange rates the distinction is obtained by imposing the following restriction on the bivariate vector autoregression of real and nominal exchange rates over the current flexible rate period nominal shocks are required to have no permanent effect on the level of the real exchange rate given this identification scheme the author analyzes the dynamic effects and relative importance of real and nominal shocks with regards to exchange rates the findings indicate that real shocks dominate nominal shocks for both exchange rate series over short and long frequencies copyright 1992 by mit press

do devaluations improve the trade balance the evidence revisited do devaluations improve the trade balance the evidence revisited this paper reexamines the effectiveness of devaluation in trade balance adjustment the question is addressed in a framework which improves the previous empirical literature in several respects the evidence indicates that devaluations have been a successful tool in inducing trade balance adjustment in particular nominal devaluations are found to result in significant real devaluations that last for at least three years and the real devaluation induces significant trade flows that are distributed over a two to three year period the evidence comes from two different samples 1953 73 and 1975 84 involving twenty seven countries and sixty devaluation episodes 1 introduction do devaluations affect real magnitudes in particular the trade balance a devaluation may effect the trade balance through two channels devaluation of the real exchange rate and a direct effect on domestic absorption the traditional approach stresses the first channel a nominal devaluation is assumed to change the real exchange rate a relative price and thus improve competitiveness in turn if relative prices the terms of trade in a two country two good model affect the trade balance devaluation will be successful in the sense of improving the trade balance ceteris paribus the absorption effect becomes the sole or most important channel in the monetary approach in a world in which all goods and assets are perfect substitutes prices are exogenously given for the small country and wages and prices are flexible in both nominal and real terms a devaluation increases the price level by the same percentage the increase in the price level reduces real balances and thus domestic absorption dornbusch 1973 883 has argued that if such a real balance effect is not present then it might stand to reason that the effects of devaluation are negligible not that there must be other powerful avenues through which it exerts its effects emphasis added the controversy over the effects of devaluation on the trade balance arises because according to frenkel and johnson 1976 42 the monetary approach rejects the emphasis given to the role of relative prices in the analysis of devaluation global monetarists argue that neither of the links in the chain postulated by the traditional approach is likely to hold in practice see laffer 1977 the major disagreement centers on the question of the effectiveness of nominal devaluation to affect the real exchange rate and the importance of the latter in influencing trade flows theoretical arguments have not settled the issue the question is as strongly debated today as it was forty years ago see for example branson 1983 katseli 1983 kaldor 1983 nashashibi 1983 and mckinnon 1981 nor does it seem that the available empirical evidence leads to a consistent answer the best known studies cooper 1971 laffer 1977 salant 1977 miles 1979 gylfason and risager 1984 reach contradictory conclusions 1 cooper and gylfason and risager find that devaluations improve the trade balance or current account while laffer and miles conclude exactly the opposite salant finds that devaluations improve the trade balance but not as often as the overall balance of payments in the face of such diverse findings frenkel 1984 suggests that a reexamination of the issue would be useful indeed himarios 1985 shows that a close examination of miles s widely quoted study reveals serious deficiencies that once addressed lead to opposite results this paper provides new evidence concerning the effectiveness of devaluation in trade balance adjustment the approach differs from past studies in several respects it differs from cooper s laffer s and salant s studies in that it accounts for the effects of other variables that affect the trade balance

accounting for real and nominal exchange rate movements in the post bretton woods period abstract using the technique developed by blanchard and quah we decompose real and nominal exchange rate movements into the components induced by real and nominal factors nominal shocks have had a minor effect on the real and nominal bilateral exchange rates between the us and canada japan and germany there is little evidence of exchange rate overshooting real demand rather than supply shocks have been responsible for volatile exchange rate movements structural models of exchange rate determination need to consider such shocks as an important fundamental determinant

the j curve effect and us agricultural and industrial trade this paper examines the j curve hypothesis for us agricultural and manufactured goods using the shiller lag model the results support the j curve effect for agricultural goods but not for manufactured goods these findings explain why many studies in the literature fail to support the j curve phenomenon there are two explanations for these findings 1 the aggregation bias of data that combine both agricultural and manufactured goods and 2 the country under study is often an industrial nation like the us or japan with a high proportion of manufactured goods in both exports and imports

is the exchange rate a shock absorber or a source of shocks new empirical evidence this paper analyses the role of the real exchange rate in a structural vector autoregression framework for the united kingdom euro area japan and canada vis a vis the united states a new identification strategy is proposed building on sign restrictions the results are compared to the benchmark conventional approach of clarida and gali 1994 based on longrun zero restrictions although the restrictions are derived from the same theoretical model the results are strikingly different in contrast to the benchmark model an important role for nominal shocks in explaining real exchange rate fluctuations is found hence the exchange rate can rather be considered as a source of shocks instead of a shock absorber

the role of price risk in china s agricultural and fisheries exports to the us abstractthis article explores the effect of price risk on the us importers optimal allocation of agriculture imports between the major supplier china and other competing countries we first modify a demand system to account for the impacts of own price risk and cross price risk and then apply the model to 16 agricultural and fisheries commodities exported to the us the estimation results show that importers are sensitive to price risks of 14 chinese commodities comparisons between price risk trade relations of agricultural and fisheries products and between trade effects of cross price risk on chinese goods and substitutes provide strong evidence for explaining the observed trade patterns our study highlights the importance of price stability in promoting international trade especially from developing countries to developed countries

nonlinear permanent temporary decompositions in macroeconomics and finance we suggest a method of decomposing univariate and multivariate nonlinear processes into their permanent and temporary components extending the analysis of beveridge and nelson 1981 and stock and watson 1987 we provide applications in the univariate nonlinear case to recent work on nonlinearities in the us business cycle and in the multivariate nonlinear case to recent work on asymmetric nonlinear adjustment in the term structure of interest rates for the us the business cycle results suggest that the method may be particularly useful in future research on output fluctuations

parametric and semiparametric estimation of sample selection models an empirical application to the female labour force in portugal this paper applies both parametric and semiparametric methods to the estimation of wage and participation equations for married women in portugal the semiparametric estimators considered are the two stage estimators proposed by newey 1991 and andrews and schafgans 1998 the selection equation results are compared using the specification tests proposed by horowitz 1993 horowitz and hardle 1994 and the wage equation results are compared using a hausman test significant differences between the two approaches indicate the inappropriateness of the standard parametric methods to the estimation of the model and for the purpose of policy simulations the greater departure seems to occur in the range of the low values of the index corresponding to a specific group of women copyright 2001 john wiley sons ltd

the planting real option in cash rent valuation after entering into a farmland cash rent contract in the fall a tenant farmer has flexibility over the spring crop choice and the input application level failure to account for these options will bias estimates of what farmers should pay to rent land applying monte carlo simulation methods this study investigates the option values for these choices a multivariate gaussian copula mgc is employed to account for dependence among yields and prices results show that the average cash rent valuation for the real option approach is 33 6 higher than that for the conventional net present value npv method in which the input intensity option is 0 9 crop planting sequence is shown to impact the real option value

limited dependent variables in willingness to pay studies applications in health care the appropriate technique for econometric analysis of wtp willingness to pay data is an issue which has not been addressed in many studies of wtp for health and health care this paper argues that whether an open ended question or a payment scale approach is adopted the way in which wtp is recorded means that limited dependent variable models are more appropriate than standard regression analysis data from an open ended question on wtp for maternity care contain a large proportion of zeros and the evidence suggests that a two part specification performs better than ols or a standard tobit model if the payment scale method is adopted our argument suggests that grouped data regression is an appropriate econometric technique in practice with data from a study in northern norway the results from ols and grouped data regression are broadly similar

the effects of the yuan dollar exchange rate on agricultural commodity trade between the united states china and their competitors the united states claims that the undervaluation of chinese currency the yuan causes u s exports to china to decrease and imports from china to increase furthermore because the yuan is undervalued only against the dollar u s competitors have an advantage in exporting to china and china has an advantage over its competitors in exporting to the united states this study develops a theoretical model to analyze the effect of the yuan undervaluation on prices supply demand and trade in the united states china and their competitors this study applies a cointegration error correction model to empirically quantify the short run and long run effects of the devaluation of the yuan on important agricultural commodities traded between the united states china and their competitors these commodities include chinese imports of milk soybeans and cotton from the united states and u s imports of beans fruit juice and fruit from china the results show that yuan devaluation causes chinese imports of u s milk soybeans and cotton to decline and u s imports of beans fruit juice and fruit from china to increase in the short run and in the long run

import prices export prices and the current account an asymmetry abstract we demonstrate that there is an important asymmetry between the effects of temporary import and export price shocks on the current account that is ignored in theoretical and empirical work this asymmetry is found to hold for u s and u k data

semiparametric estimation of the intercept of a sample selection model this paper provides a consistent and asymptotically normal estimator for the intercept of a semiparametrically estimated sample selection model the estimator uses a decreasingly small fraction of all observations as the sample size goes to infinity as in heckman 1990 in the semiparametrics literature estimation of the intercept has typically been subsumed in the nonparametric sample selection bias correction term the estimation of the intercept however is important from an economic perspective for instance it permits one to determine the wage gap between unionized and nonunionized workers decompose the wage differential between different socioeconomic groups e g male female and black white and evaluate the net benefits of a social programme

applying the copula approach to sample selection modelling the limited availability of tractable multivariate distributions undermines the validity of the standard parametric approach to sample selection modelling copula distributions can be very useful in situations where the applied researcher has a prior on the distributional form of the margins since the modelling of the latter is separated from that of the dependence structure the present article first presents an application to female work data afterwards the approach is analysed in an application to contingent valuation data on recreational values of forests it is shown that the copula approach is especially beneficial in case of strong departures from the hypothesis of normality

an empirical analysis of real exchange rate movements in the euro this study uses a long run structural vector autoregressive svar approach to identify the sources of real exchange rate fluctuations in the euro the empirical results indicate that real shocks play a dominant role in explaining the real exchange rate fluctuations in the euro this implies that the best approach for policymakers toward improving the competitiveness of the eu is to focus on improvements in the real economy such as improvements in efficiency technologies and productivity

the emerging u s current account deficit in the 1980s a cointegration analysis this paper seeks to understand the recent history of u s external imbalances by identifying the long run tendency of the u s current account balance and investigating its behavior the procedure that is adopted is to estimate cointegrating regressions between u s exports and imports of goods and services estimates from cointegrating regressions between several measures of u s exports and imports show that up to about the end of 1983 the u s current account tended toward zero since that time there has been an apparent structural shift resulting in a long run tendency for a deficit in excess of 100 billion per year copyright 1992 by mit press

modelling zero values and protest responses in contingent valuation surveys in contingent valuation surveys the category of zero bidders refers to individuals that are not willing to pay anything for the programme under analysis specific questions can help to identify true zero values coming from people that are indifferent to the programme separately from protest responses the latter are generally excluded from the analysis this paper introduces a mixture sample selection model that takes into account both zero values and protest responses in the estimates the model is applied to the valuation of a traffic calming scheme aimed at reducing risks for residents in three villages in the north east of england

exchange rates and the trade balance abstract the impact of the exchange rate on the trade balance is examined for a number of developing countries non structural techniques indicate that a depreciation of the real exchange rate is not strongly associated with a significant improvement in the trade balance

estimation of j curves united states and canada delayed reactions to exchange rate changes in trade on current account balances are known to exist in both the united states and canada a model has been constructed to estimate relative price effects for trade with major partners in order to determine the quantitative magnitudes and relevant time delays for both countries adjustments in trade accounts there is a distinct tendency for balances to worsen when exchange depreciation first occurs and then to improve after several quarters have passed there is also a tendency for the balances to worsen again the u s and canadian time profiles of adjustment are found to be similar

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment