Working Paper: NBER ID: w8361
Authors: Greg Leonard; Alan C. Stockman
Abstract: This paper 'goes back to basics' in empirical analysis of the J-Curve. First, we document strong violations in the distributional assumptions that underlie nearly all previous work on this issue. Second, we employ distribution-free, non-parametric statistical tests to characterize the data and summarize the key relationships between real exchange rates, the current account, and real GDP. We find some (weak) evidence of a J-Curve in the data. Interestingly, however, we document that this evidence is not consistent with the standard theoretical explanation of the J-Curve. Consequently, our empirical results pose a strong challenge for international economic theory.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| real depreciation (F31) | current account deficit (F32) |
| current account deficit (F32) | current account surplus (F32) |
| real depreciation (F31) | current account surplus (F32) |
| current account surplus (F32) | GDP (E20) |