Bilateral J-curve between Malaysia and her trading partners.

摘要

Studies of J-curve phenomenon have evolved from the Marshall-Lerner condition to establish a direct link between trade balance and exchange rate. Due to the problem of aggregation bias, empirical studies of the J-curve further evolve from employing aggregate data to bilateral data. Previous studies on J-curve phenomenon tracked a group of Asian countries including Malaysia with their trading partners and found that the empirical results were mixed. My empirical research will focus solely on Malaysia, using quarterly bilateral data (1973:I to 2003:III) with 14 of its trading partners. The model employed is the ARDL approach to cointegration and error-correction modeling. The evidence shows that there is a support for the J-curve phenomenon in the case of Germany. I have also found that real depreciation of the ringgit has favorable long-run effects in the cases of France, India, Indonesia and Singapore.