ABSTRACT
This study examines the asymmetric and symmetric impacts of appreciation and depreciation in the Korean won on Korea’s commodity trade balance with Japan. To this aim, the linear and nonlinear autoregressive distributed lag (NARDL) models are applied. However, this study methodologically differs from previous empirical studies in the related literature applying the NARDL model. These previous studies are constructed based on only short-run and long-run symmetry (denoted by SS) and short-run and long-run asymmetry (denoted by AA). This study, however, also considers two other alternative cases as short-run asymmetry-long-run symmetry (denoted by AS) and short-run symmetry-long-run asymmetry (denoted by SA).
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 See Korea International Trade Association, http://www.kita.org/kStat/byCount_SpeCount.do
2 The J-curve hypothesis is constructed on the Marshall–Lerner (ML) condition by Marshall (Citation1923) and Lerner (Citation1944) and first introduced by Magee (Citation1973). The pattern of this curve resembles the letter “J” since depreciation in a currency worsens that county’s trade balance first in the short run and initially improves in the long run.
4 Note that once normalization takes place, we have .
5 Test results indicate that all series are either or
, and the series are not integrated of order two or more. The results are available upon request.
6 The lag lengths of the models are selected based on the Akaike information criterion (AIC).