Bahmani-Oskooee, Mohsen,

Two studies have assessed the link between the exchange rate and trade in services. While one study concluded that the U.S. insurance and financial service trade is not affected by the exchange rate, another study reversed that finding by applying a non-linear method. We add to this literature by considering Singapore’s experience. After estimating the linear and non-linear ARDL models using Singapore’s imports and exports of insurance and financial service trade, we conclude that changes in the real effective value of the Singapore dollar have both short-run and long-run effects on Singapore’s trade in both services.

Almost all studies that have estimated trade models have relied upon trade in tangible commodities. However, a new direction today is to consider trade in service sectors to identify the sectors that could benefit from currency depreciation. This new literature is in its infancy, and we add to this emerging literature by considering India’s trade in eight service sectors/categories. We followed two approaches of symmetric (linear) and asymmetric (nonlinear) estimation methods and considering that the two approaches complement each other, we found that the outpayments and inpayments of all the eight sectors respond to changes in the effective exchange rate of Indian Rupee in the short run. But in the long run, only six service categories are affected. The two unaffected sectors are insurance and travel.

This study examines the asymmetric effects of Exchange Rate Volatility (ERV) on Vietnam’s international trade. Using time-series data fitted to the Nonlinear Autoregressive Distributed Lag (NARDL) model, we find that positive changes in ERV have a negative impact on the trade balance in the short-run. On the other hand, increases in ERV have a positive impact on the trade balance in the long-run. We also find that negative changes in ERV do not have any significant effect on the trade balance.

China is the largest trading partner of Pakistan. Therefore, it is very important to consider the trade flows between Pakistan and China and their response to rupee–yuan volatility. Previous research assumed that response of trade flows to measure of volatility is symmetric. In this study, our basic objective is to check whether the trade flows respond to volatility in a symmetric or asymmetric manner. Annual data over the period 1980–2018 for 14 Pakistani industries exporting to and 34 industries importing from China are analyzed. We find short-run asymmetric effects of exchange rate volatility in almost all industries that last into long-run asymmetric effects in 40–50 per cent of industries. Non-linear models yielded more significant effects of volatility than the traditional linear models.

The J‐curve hypothesis asserts that a depreciation could worsen the trade balance in the short run but improves it in the long run. In testing the hypothesis, almost all previous studies used trade data in goods only. We add to this literature by considering the US trade in insurance and financial services with each of its nine trading partners. Using quarterly data over the period 2003Q1–2019Q4, when we estimated a linear model, we found limited support for the J‐curve effect. However, when we estimated a nonlinear model to assess the possibility of asymmetric response of a service trade to exchange rate changes, we found much more support for the hypothesis. Precisely, we found support for the asymmetric J‐curve in the US insurance (finance) trade with Australia, Belgium, France, and Korea (Australia, Germany) and asymmetric inverse J‐curve in the US insurance (finance) trade with Germany, Italy, and …

Current trend in applied research points at application of Shin et al.’s (2014) nonlinear ARDL approach to asymmetric error-correction modeling and asymmetric cointegration. Two studies in the literature have applied these approaches to assess the short-run and long-run asymmetric effects of exchange rate volatility on aggregate exports and imports of Asian and African countries, respectively. We add to this new literature by considering the experiences of G7 countries. We find that trade flows of almost all countries are affected by volatility asymmetrically in the short run. In the long run, while French and Italian exports are boosted by increased volatility, German exports are hurt. On the other hand, decreased volatility reduces French and Italian exports. As for G7 imports, increased exchange rate volatility hurts imports of Canada, Germany, France, Italy, and the U.K. in the long run and decreased volatility boosts …

The new direction on the link between a measure of exchange rate volatility on trade flows is to estimate nonlinear models to determine if trade flows respond to exchange rate volatility in an asymmetric manner. In this paper we consider the U.S. trade flows with 12 South American partners. Estimates of traditional trade models revealed that only U.S. exports to Paraguay and Venezuela and its imports from Peru responds adversely to exchange rate volatility in the long run. However, estimates of nonlinear models predicted that U.S. exports to Bolivia, Chile, Colombia, Paraguay, and Venezuela, and its imports from Argentina, Bolivia, Peru, Suriname, Uruguay, and Venezuela are affected asymmetrically. Clearly, the nonlinear approach yields relatively more significant outcomes than the linear approach and must be the norm for future research on the topic.

Previous studies mostly assumed that the effects of policy uncertainty on trade flows are symmetric. In this article, we add to this literature by arguing and demonstrating that the effects could be asymmetric. Since asymmetry analysis requires using non‐linear models, such models yield a more significant outcome than linear models. We show this by considering the trade flows of 66 two‐digit U.S. exporting industries to Japan and 59 two‐digit Japanese exporting industries to the United States. While both the linear and non‐linear models predicted short‐run effects of the U.S. and Japanese policy uncertainty on exports of most industries, the long‐run effects were significantly different. In the long run, while the linear model predicted no significant effects of either uncertainty measure, the non‐linear model 12 (14) U.S. exporting industries that were affected by changes in the Japanese (the U.S.) policy uncertainty …