142
Views
0
CrossRef citations to date
0
Altmetric
Research Article

Threshold-based asymmetric reactions of trade balances to currency devaluation: fresh insights from smooth transition regression (STR) model

, , &
Pages 435-456 | Received 21 Feb 2023, Accepted 08 May 2023, Published online: 11 Jul 2023

References

  • Acar, M. 2000. “Devaluation in Developing Countries: Expansion or Contraction?” Journal of Economics and Social Science Research 2 (1): 59–83.
  • Akinwale, S. O., M. D. Solawon, E. O. Adekunle, and T. O. Obagunwa. 2018. “Exchange Rate Devaluation and Balance of Trade in Nigeria: An Error Correction Model Approach.” International Journal of Innovative Research & Development 7 (8): 137–143. https://doi.org/10.24940/ijird/2018/v7/i8/AUG18084.
  • Alalade, S. Y., O. Adekunle, and O. A. Joseph. 2014. “Foreign Exchange Rate Regimes and Non-Oil Export Performance in Nigeria.” International Journal of Business and Behavioral Sciences 4 (1): 1–22.
  • Alege, P. O., and E. S. Osabuohien. 2015. “Trade-Exchange Rate Nexus in Sub-Saharan African Countries: Evidence from Panel Cointegration Analysis.” Foreign Trade Review 50 (3): 151–167. https://doi.org/10.1177/0015732515589440.
  • Alemu, A. M. 2014. “Examining the Effects of Currency Depreciation on Trade Balance in Selected Asian Economies.” International Journal of Global Business 7 (1): 59–76.
  • Ali, N., A. Wuhab, and K. Khan. 2022. “The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit.” Global Economic Review VII (1): 145–156. https://doi.org/10.31703/ger.2022(VII-I).12.
  • Aliyu, A. J., and S. M. Tijjani. 2015. “Asymmetric Cointegration Between Exchange Rate and Trade Balance in Nigeria.” Cogent Economics & Finance 3 (1): 1–19. https://doi.org/10.1080/23322039.2015.1045213.
  • Anoke, C. I., S. I. Odo, and B. C. Ogbonna. 2016. “Effect of Exchange Rate Depreciation on Trade Balance in Nigeria.” IOSR Journal of Humanities and Social Sciences 21 (3): 72–81.
  • Apamisile, O. T., and O. M. Oloba. 2020. “Asymmetric Effects of Exchange Rate Changes on Cross-Border Trade in Nigeria.” Future Business Journal 6 (8): 1–9. https://doi.org/10.1186/s43093-020-00013-0.
  • Arize, A. C., J. Malindretos, and E. U. Igwe. 2017. “Do Exchange Rate Changes Improve the Trade Balance: An Asymmetric Nonlinear Cointegration Approach.” International Review of Economics and Finance 45:316–326. https://doi.org/10.1016/j.iref.2017.02.007.
  • Auboin, M., and M. Ruta. 2011. “The Relationship Between Exchange Rates and International Trade: A Literature Review.” World Trade Review 12 (3): 577–605. https://doi.org/10.1017/S1474745613000025.
  • BahmaniOskooee, M., and N. Durmaz. 2020. “Exchange Rate Volatility and Turkey–EU Commodity Trade: An Asymmetry Analysis.” Empirica 48 (2): 429–482. https://doi.org/10.1007/s10663-020-09472-8.
  • BahmaniOskooee, M., and R. Nouira. 2019. “On the Impact of Exchange Rate Volatility on Tunisia’s Trade with 16 Partners: An Asymmetry Analysis.” Economic Change and Restructuring 53 (3): 357–378. https://doi.org/10.1007/s10644-019-09250-y.
  • Baldwin, R., and P. Krugman. 1989. “Persistent Trade Effects of Large Exchange Rate Shocks.” Quarterly Journal of Economics 104 (4): 635–654. https://doi.org/10.2307/2937860.
  • Bhat, S. A., and J. A. Bhat. 2021. “Impact of Exchange Rate Changes on the Trade Balance of India: An Asymmetric Nonlinear Cointegration Approach.” Foreign Trade Review 56 (1): 71–88. https://doi.org/10.1177/0015732520961328.
  • Broock, W.A., Scheinkman, J. A., Dechert, W. D., and Lebaron, B. 1996. A test for independence based on the correlation dimension. Economic Review 15 (3): 197–233. https://doi.org/10.1080/07474939608800353.
  • Buba, S., S. M. I. Al-Jadi, and G. M. Guza. 2018. “Asymmetric Cointegration Between Exchange Rate and Trade Balance in Thailand.” World Journal of Economic and Finance 4 (1): 75–84.
  • Bussiere, M. 2013. “Exchange Rate Pass-Through to Trade Prices: The Role of Nonlinearities and Asymmetries.” Oxford Bulletin of Economics and Statistics 73 (5): 731–758. https://doi.org/10.1111/j.1468-0084.2012.00711.x.
  • CBN. 2021. Central Bank of Nigeria Statistical Bulletin. Abuja: CBN.
  • Chien, M., C. Cheng, and N. Setyowati. 2019 Asymmetric Effects of Exchange Rate Volatility on Bilateral Trade Between Taiwan and Indonesia. The Singapore Economic Review, pp 1–44
  • Cooper, R. N. 1971. “Currency Devaluation in Developing Countries.” Essays in International Finance 86 (1): 1–38.
  • Dixit, A. K. 1989. “Hysteresis, Import Penetration and Exchange Rate Pass Through.” The Quarterly Journal of Economics 104 (2): 205–228. https://doi.org/10.2307/2937845.
  • Dong, W. 2007. Expenditure Switching Effect and the Choice of Exchange Rate Regime. International Department, Bank of Canada. May 9, 2007, [email protected].
  • Duru, I. U., M. A. Eze, A. S. Saleh, A. Yusuf, and K. Uzoma. 2022. “Exchange Rate and Trade Balance in Nigeria: Testing for the Validity of J-Curve Phenomenon and Marshall-Lerner Condition.” Asian Themes in Social Sciences Research 6 (1): 1–11. https://doi.org/10.33094/atssr.v6i1.65.
  • Edwards, S. 1986. “Are Devaluations Contractionary?” The Review of Economics and Statistics 68 (3): 501–507. https://doi.org/10.2307/1926028.
  • Fabrizio, F. 1998. “Exchange Rates and External Competitiveness in Mozambique Determinants.” In IMF, 1998, Republic of Mozambique-Selected Issues and Statistical Appendix. Washington: SM/98/78 International Monetary Fund.
  • Fabrizio, F. 2201. “Equilibrium Exchange Rates and Its Determinants.” IMF, 2001, Republic of Mozambique-selected issues and statistical appendix.” IMF Country Report, no. 01/25 International Monetary Fund, Washington.
  • Falk, M. 2008. “Determinants of the Trade Balance in the Industrialized Countries.” FIW Research Report 13: 1–31.
  • Gebeyehu, A. B. 2014. “Exchange Rate and Trade Balances; J-Curve Effects in Ethiopia.” Journal of Economics & Sustainable Development 5 (24): 185–191.
  • Genc, E. G., and O. K. Artar. 2014. “The Impact of Exchange Rates on Exports and Imports of Emerging Countries.” European Scientific Journal 10 (13): 128–141.
  • Hashmi, S. M., B. H. Chang, and M. Shahbaz 2019. “Asymmetric Effect of Exchange Rate Volatility on India’s Cross-Border Trade: Evidence from Global Financial Crisis and Multiple Threshold Nonlinear Autoregressive Distributed Lag Model.” Australian Economic Papers. 1–34
  • Iboma, G. E. 2022. “Analysis of the Effects of Currency Devaluation on Trade Balance and Economic Growth in Nigeria.” Multidisciplinary Journal of Research Development 31 (1): 1–15.
  • Ikpe, M., A. C. Odo, S. A. Okwor, and K. E. Uma. 2021. “Exchange Rate Volatility and Dynamics of Non-Oil Trade: Evidence from Nigeria.” The Nigerian Journal of Economic and Social Studies 63 (1): 25–49.
  • IMF. 1984. Exchange Rate System: Lessons of the Past and Options for the Future. IMF Occasional Paper No. 30. Washington DC.
  • Ju, J., Y. Wu, and L. Zeng. 2010. “The Impact of Trade Liberalization on the Trade Balance in Developing Countries.” International Monetary Fund Staff Papers 57 (2): 427–229. https://doi.org/10.1057/imfsp.2009.19.
  • Kamal, K. M. 2015. “A Panel Data Analysis to Evaluate the Effects of Currency Devaluation on Major Export Items.” Dhaka University Journal of Social Science 63 (1): 53–57. https://doi.org/10.3329/dujs.v63i1.21769.
  • Kamugisha, G., and J. E. Assoua. 2020. “Effects of a Devaluation on Trade Balance in Uganda: An ARDL Cointegration Approach.” International Journal of Economics and Finance 12 (7): 42–53. https://doi.org/10.5539/ijef.v12n7p42.
  • Kapur, I., M. Hadjimichael, P. Hilberts, J. Schiff, and P. Szymczak. (1991). Ghana: Adjustment and Growth. International Monetary Fund, Occasional Paper No. 86. Washington: IMF
  • Karoro, T. D., M. J. Aziakpono, and N. Cattaneo. 2009. “EXCHANGE RATE PASS-THROUGH to IMPORT PRICES in SOUTH AFRICA: IS THERE ASYMMETRY? 1.” South African Journal of Economics 77 (3): 380–398. https://doi.org/10.1111/j.1813-6982.2009.01216.x.
  • Keho, Y. 2021. “Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from Threshold Nonlinear ARDL Model.” Theoretical Economics Letters 11 (03): 507–521. https://doi.org/10.4236/tel.2021.113034.
  • Khaskheli, A., Y. Jiang, S. A. Raza, K. A. Khan, and M. A. Qureshi. 2021. “Financial Development, International Trade and Environmental Degradation: A Nonlinear Threshold Model Based on Panel Smooth Transition Regression.” Environmental Science and Pollution Research 28 (21): 26449–26460. https://doi.org/10.1007/511356-020-11912-8.
  • Krugman, P., and L. Tailor. 1978. “Contractionary Effects of Devaluation.” Journal of International Economics 8 (3): 445–456. https://doi.org/10.1016/0022-1996(78)90007-7.
  • Leite, S., A. Pellechio, L. Zanforlin, G. Bergashaw, S. Fabrizio, and J. Harnack 2000. “Ghana: Economic Development in a Democratic Environment.” International Monetary Fund, Occasional Paper No. 199, IMF, Washington.
  • Maehle, N., H. Teferra, and A. Khachatryan 2013. “Exchange Rate Liberalization in Selected Sub-Saharan African Countries: Success, Failure and Lesson.” IMF Working Paper, African department, No. 13/32
  • Mehtiyev, J., R. Magada, and L. Vasa. 2021. “Exchange Rate Impacts on International Trade.” Economic Annals 190 (5–6(2): 12–22. https://doi.org/10.21003/ea.V190-02.
  • Memiago, C., and J. H. Eita. 2017. “The Effect of Exchange Rate Changes on Sub-Saharan African Trade.” International Journal of Sustainable Economy 9 (3): 213–230. https://doi.org/10.1504/IJSE.2017.085065.
  • Muoneke, O. B., K. I. Okere, and F. C. Onuoha. 2022. “Extreme Exchange Rate Dynamics and Export Trade in the Selected Oil-Exporting Countries in Africa. Multiple Asymmetric Threshold Nonlinear ARDL Approach.” The Journal of International Trade & Economic Development 23 (3): 1–24. https://doi.org/10.1080/09638199.2022.2139405.
  • Nasir, M. A., and M. Leung. 2021. “US Trade Deficit, a Reality Check: New Evidence Incorporating Asymmetric and Nonlinear Effects of Exchange Rate Dynamics.” The World Economy 2021 (44): 818–836. https://doi.org/10.1111/twec.12986.
  • Nord, R., Y. V. Sobolev, D. G. Dunn, A. Hajdenberg, N. Hobdari, S. Maziad, and S. Roudet. 2009. “Tanzania, the Story of an African Transition.” Washington: International Monetary Fund.
  • O’Conell, S., B. O. Maturu, F. M. Mwega, N. S. Ndung’u, and R. W. Ngugi. 2010. Capital Mobility, Monetary Policy, and Exchange Rate Management in Kenya, eds Adam, Coller and Ndung U, 172–210. Kenya: Policies for Prosperity, Oxford University Press, Oxford.
  • Odionye, J. C., and J. O. Chukwu. 2021. “The Asymmetric Effects of Currency Devaluation in Selected Sub-Saharan Africa.” Economic Annals LXVI (230): 135–155. https://doi.org/10.2298/EKA2130135O.
  • Odionye, J. C., E. U. Ojiaku, and C. N. Uba. 2023. “Impact of Interest Rate Differential, Exchange Rate Changes and Political Stability on Foreign Capital Inflow in Nigeria: Discrete Threshold Regression Model.” Cogent Economics & Finance 11 (1): 2203590. https://doi.org/10.1080/23322039.2023.2203590.
  • Okere, K. I., O. B. Muoneke, G. Ogbolu, and O. P. Egbo. 2023. “The Moderating Role of Oil Price in the Export-Exchange Rate Nexus for Selected African Economics: Evidence from MATNARDL Model.” HELIYON 9 (4): e15343. https://doi.org/10.1016/j.heliyon.2023.e,15343.
  • Okpeku, L. O., and O. N. Aras. 2022. “Effects of Depreciation on Trade Balances in Selected African Countries.” Global Journal of Management and Business Research: B Economics and Commerce 22 (1): 1–10.
  • Omojimite, B. U., and G. Akpokodje. 2010. “A Comparative Analysis of the Effects of Exchange Rate Volatility on Exports in the CFA and Non-CFA Countries of Africa.” Journal of Social Science 24 (1): 23–31. https://doi.org/10.1080/09718923.2010.11892833.
  • Onakoya, A. B., S. B. Johnson, and O. J. Ajibola. 2018. “Exchange Rate and Trade Balance: The Case of J-Curve Effect in Nigeria.” Kampala International University Journal of Social Sciences 4 (4): 47–63.
  • Onwuka, K. O., and K. O. Obi. 2015. “Exchange Rate Volatility and Growth Dynamics: Evidence from Selected Sub-Saharan African Countries.” British Journal of Economics, Management & Trade 6 (1): 61–77. https://doi.org/10.9734/BJEMT/2015/12308.
  • Ozcelebi, O. 2021. “Assessing the Impacts of Global Economic Policy Uncertainty and the Long-Term Bond Yields on Oil Prices.” Applied Economic Analysis 29 (87): 2021, 226–244. https://doi.org/10.1108/AEA-05-20200046.
  • Perron, P. 1989. “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis.” Econometrica 57 (6): 1361–1401. https://doi.org/10.2307/1913712.
  • Perron, P. 1997. “Further Evidence on Breaking Trend Functions in Macroeconomic Variables.” Journal of Econometrics 80 (2): 251–270. https://doi.org/10.1016/S0304-4076(97)00049-3.
  • Rana, M. M. 2015. “Internal and External Balances with Expenditure Changing and Switching Policies in Bangladesh: An Empirical Analysis.” IOSR Journal of Economics and Finance 6 (4): 44–52.
  • Rawlins, G. 2011. “Currency Depreciations and the Trade Balance: The Case of Sub-Saharan African Countries.” The Journal of Applied Business and Economics 12 (6): 132–148.
  • Reserve Bank of Malawi. 2003. “Evolution of Exchange Rate Determination in Malawi: Past and Present. Reserve Bank of Malawi.” http://www.rbm.mw/research_papers.aspx.
  • Santos-Paulino, A. U. 2004. “Trade Liberalization on the Balance of Payment in Selected Developing Countries.” Manchester School 71 (1): 100–118. https://doi.org/10.1111/j.1467-9957.2004.00382.x.
  • Simwaka, K. 2007. “Modeling and Forecasting the Malawi Kwacha-US Dollar Nominal Exchange Rate.” MPRA Paper No. 3327.
  • Terasvirta, T. 1998. “Modelling Economic Relationships with Smooth Regression.” In Handbook of Applied Economic Statistics, edited by A. Ullah and D. Gills, 229–246. New York: Dekker.
  • Terasvirta, T. 2004. “Smooth Transition Regression Modeling.” In Applied Time Series Econometrics, edited by H. Lutkepohl and M. Kratzig, 222–242. Cambridge: Cambridge University Press. https://doi.org/10.1017/CBO9780511606885.007.
  • Thahara, A.F., Rinosha, K.F. and Shifaniya, A.J.F. 2021. “The relationship between exchange rate and trade balance: Empirical evidence from Sei Lanka.“ The Journal of Asian Finance, Economics and Business 8 (5): 37–41. https://doi.org/10.13106/jafeb.2021/vol8no5.0037.
  • Ullah, A., A. Mansoora, S. A. Raza, and S. Ali. 2021. “A Threshold Approach to Sustainable Development: Nonlinear Relationship Between Renewable Energy Consumption, Natural Resource Rent and Ecological Footprint.” Journal of Environmental Management 295:1–10. https://doi.org/10.1016/j.jenvman.2021.113073.
  • Ullah, A., X. Zhao, A. A. Amin, A. A. Syed, and A. Riaz. 2022. “Impact of COVID-19 and Economic Policy Uncertainty on China’s Stock Market Returns: Evidence from Quantile-On-Quantile and Causality-In-Quantiles Approaches.” Environmental Sciences and Pollution Research 30 (5): 12596–12607. https://doi.org/10.1007/s11356-022-22680-y.
  • United Nations Conference on Trade and Development. 2021. “UNCTAD Annual Report.” New York: United Nations.
  • VuraL, B. M. T. 2016. “Effect of Real Exchange Rate on Trade Balance: Commodity Level Evidence from Turkish Bilateral Trade Data.” Procedia Economics and Finance 38 (pp): 499–507. https://doi.org/10.1016/S2212-5671(16)30221-0.
  • World Development Indicators. 2021. “The World Bank.” Washington, D. C. http://data.worldbank.org/indicator.
  • World Economic Outlook, IMF. 2015. “International Monetary Fund.” Washington. October, 2015.
  • World Economic Outlook, IMF. 2019. “International Monetary Fund.” Washington. October, 2019.
  • World Economic Outlook, IMF. 2021. “International Monetary Fund.” Washington. October, 2021.
  • World Trade Organisation. 2021. “The World Bank.“ December, 2021.
  • World Trade Statistical Review. 2021. “The World Bank.“ December, 2021.
  • Yildirim, A. E., and T. B. Saraç. 2022. “Exchange Rate Volatility and Turkey-Germany Bilateral Trade: An Asymmetry Analysis.” The Journal of International Trade & Economic Development 31 (5): 783–797. https://doi.org/10.1080/09638199.2021.2022742.
  • Zakaria, M. 2014. “Effects of Trade Liberalization on Exports, Imports and Trade Balance in Pakistan: A Time Series Analysis.” Prague Economic Papers 23 (1): 121–139. https://doi.org/10.18276/j.pep.476.
  • Zivot, E., and K. Andrews. 1992. “Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis.” Journal of Business and Economic Statistics 10 (10): 251–270. https://doi.org/10.1080/07350015.1992.10509904.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.