The Persistence And Japan's Trade Surplus

Abstract

In this study we use tiem-series data to examine the persistence of Japanese trade balance surplus and the existence of a J-curve effect for the period 1975 (I)–1990(I). We extend the earlier studies by applying the Shiller lag model to the first differences of the variables that are subject to a unite root process. The empirical findings support the J-curve effect for Japan and also illustrate that it take 13 quarters before the full effect of an exchange rate change on the trade balance is realized. The results also suggest that in 1985(I), for example, a once-and for -all real currency appreciation of 36.2 percent would remove the average quarterly real trade balance surplus of 2.5 trillion yen in 13 quartets, ceteris paribys.[F30]

^*The authors would like to express their appreciation to Amin Al-Lozy for collecting the data, their colleague Jan Palmer for his constructive comments, and an anonymous referee for very helpful comments on an earlier draft of this paper. The usual disclaimer applies.

^*The authors would like to express their appreciation to Amin Al-Lozy for collecting the data, their colleague Jan Palmer for his constructive comments, and an anonymous referee for very helpful comments on an earlier draft of this paper. The usual disclaimer applies.

Notes

^*The authors would like to express their appreciation to Amin Al-Lozy for collecting the data, their colleague Jan Palmer for his constructive comments, and an anonymous referee for very helpful comments on an earlier draft of this paper. The usual disclaimer applies.