Page 73 - Azerbaijan State University of Economics

J-CURVE AND THE MARSHALL-LERNER CONDITION - THE CASE OF AZERBAIJAN

for the J-curve effect in the short run, while in the long run the UK’s

trade balance improved in only six cases (Australia, Austria, Greece,
South Africa, Singapore and Spain). Only the UK’s trade balances with

Canada and USA support the J-curve phenomenon.
According to the findings of Bahmani-Oskooee et al. (2005), in the

case of Australia, only the trade balance with Norway follows the J-

curve phenomenon. They found that the depreciation of the Australian
dollar has a positive and significant impact only on the trade balance

with Denmark, Korea and New Zealand out of its 23 major trading
partners. Buluswar et al. (1996) analyzed the effect of depreciation of the

Indian rupee on its trade balance using stationary and co integration by

employing aggregate data. He revealed that there is no evidence that
India’s trade balance follows the J-curve phenomenon and the trade

balance has not even improved in the long run. In contrast, Arora et al.
(2003), using bilateral trade data and employing the ARDL model for

India’s major trading partners found that its trade balance with Australia,
Germany, Italy and Japan improved in the long run. Nonetheless, their

findings are compatible with Buluswar et al. (1996) in the case of the J-

curve phenomenon.
Narayan (2004) asserted that, with devaluation of the New Zealand

dollar, its trade balance followed the J-curve pattern. Similarly,
Bahmani-Oskooee and Kantipong (2001) found that Thailand’s trade

balance with the US and Japan also followed the J-curve pattern. Wilson
(1999), examined the impact of currency devaluation between Malaysia

and its two major trading partners (the US and Japan). He concluded that

exchange rate depreciation does not have any significant impact on the
bilateral trade balance and found no evidence for the J-curve effect.

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