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Brazil–US commodity trade and the J-Curve

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Abstract:

Currency devaluation or depreciation is said to temporarily worsen a country’s trade balance and improve it later, an effect that is called the J-Curve. Previous research that tested the J-Curve for Brazil used the country’s aggregate trade flows with the rest of the world and did not find support for the phenomenon. In this article, we consider the trade flows between Brazil and a major trading partner, the United States, disaggregating their trade flows by commodity. We then test the empirical validity of the J-Curve for each of the 92 industries that trade between the two countries. We find support for the phenomenon in 31 industries. Therefore, disaggregation by industry seems to yield some support for the phenomenon.

Keywords: Brazil; F31; F32; J-Curve; The United States; bounds testing; industry data

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2013.824548

Affiliations: 1: The Center for Research on International Economics and Department of Economics, The University of Wisconsin-Milwaukee, Milwaukee, WI, 53201, USA 2: Department of Economics, Penn State University, Mont Alto, PA, 17237, USA 3: Department of Economics, Northeastern Illinois University, Chicago, IL, 60625, USA

Publication date: January 2, 2014

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