Example of Literature Matrix

Author (year)

Magee (1973)

Junz and
Rhomberg
(1973)

Main regression

Dependent variable

Relevant explanatory
variables

Countries

None

X/M

Exchange rate, domestic real

US
income, foreign real income

Time series OLS

(i) Market shares in

manufacturing
exports (ii)
Manufacturing
exports

Austria BelgiumLuxemburg Canada

Denmark France
Price variable: relative price
Germany Italy Japan
of exports
Netherlands Norway
Sweden Switzerland
UK and the USA

Frequency,
time period

Remarks

Highlights the implications of

adjustment lags stemming
from currency contracts, Passthrough, and quantity
Monthly 1969adjustments. There may or
1973
may not be a J-Curve but the
long-run impact of
devaluation on trade-balance
is favourable
They identify lags in the
recognition of the devaluation,
in the decision to change real
variables, in delivery time, in
the replacement of inventories
Annual 1953and materials, and in
1969
production. Results: lags of up
to five years in the effects of
exchange rate changes on
market shares of countries in
world trade

(gi - gR), (Mi - MR), (Gi GR), & ERi where gi, gR are
the growth rates of income;
Costa Rica Denmark
Mi, MR are the ratio of the
Ecuador Finland France
Pooled cross section
average level of high
[(X - M)/GNP]i
Guyana Iceland Ireland Annual 1956Miles (1979)
and time series;
powered money to output; Gi,
Also, (BP/GNP)i
Israel NewZealand
1972
SURE
GR are the ratio of
Philippines Spain Sri
government consumption to
Lanka UK
output; and ERi the exchange
rate of in country i and the
rest of the world, R.
Himarios (1985) Time series OLS
The first specification gi, gR, Mi, MR, Gi, GR, Costa Rica Ecuador
Annual 1956involves: [(X & ERi where the variables Finland France Iceland 1972
M)/GNP]i The second are as defined in Miles
Israel Philippines Spain
equation involves
(1979), except for money
Sri Lanka UK

Devaluation improves the

balance of payments but not
the trade balance, i.e., the
capital account improves
following a devaluation. Thus,
there is no support for the JCurve

In nine out of ten cases,

devaluation improves trade
balance

Relevant explanatory
Countries
variables
supply for which he takes
trade balance
M1. The second equation
measured in foreign involves real exchange rate
currency (Bt).
rather than nominal exchange
rate.
GNP (Yt), world income
(YWt), domestic high
powered money (Mt), world
Time series Almon
Bahmanihigh-power money (MWt),
lag structure
Index of (X - M)t
Greece, India, Korea,
Oskooee (1985,
effective exchange rate
imposed on real
Base year = 1975
and Thailand
1989a)
deflated by wholesale prices,
exchange rate
i.e., (E/P)t - all variables
expressed in index forms
with 1975 as the base year
Exchange rate, export (and
also import) weighted
Brissimis and
Time series Almon Petroleum and noneffective exchange rate,
Leventankis
lag technique, IV
petroleum exports
Greece
Balance on invisibles and
(1989)
method
and imports
capital flows in drachmas,
etc.
Import prices, Import
Import prices, Import
volumes, export
Rosenweig and Time series Granger
volumes, Export prices,
prices, Export
USA
Koch (1988)
Tests of Causality
Export volumes; and also
volumes; also
exchange rate
exchange rate
Trade balance
defined as value of
Time series Board exports value of
Prices (domestic and
Meade (1988) Staff Model of the imports She also
USA
foreign), exchange rate
US current account focuses on the
sectoral tradebalances
Flemingham
Time series
X/M
Terms of trade, domestic and Australia
(1988)
Unrestricted
foreign income
distributed lag
model
Author (year)

Main regression

Dependent variable

Frequency,
time period

Remarks

Quarterly
1973-1980

Finds evidence of an inverse

J-curve for Greece, India, and
Korea. The long-run impact is
favourable only in the case of
Thailand

Quarterly
1975-1984

Evidence of a J-Curve for

Greece. Long-run results
consistent with BahmaniOskooee (1989a)

Monthly 1973- Introduce the concept of a

1986
'Delayed J-curve'

Quarterly
1968-1984

Quarterly
1974-1985

Investigates sectoral J-curve.

Finds no support upon
simulations. Also, there is no
evidence of delayed J-curve!
No evidence of J-curve.
However, during the fixed
exchange regime (i.e., prior to
1974), there may be some
indications of a delayed J-

Author (year)

Main regression

Wassink and
Time series None
Carbaugh (1989)

Dependent variable

US trade balance

Relevant explanatory
variables

Exchange rate

Countries

US trade with Japan

1978-1988

Remarks
curve.
Finds evidence of incomplete
pass-through leading to a
delayed J-Curve for the USA.
A delayed J-curve

US trade balance
with country j (TBj),
Rose and Yellen Time series IV and
measured as US net
(1989)
OLS
exports to j, deflated
by US GNP deflator

Quarterly
1960-1985

No support. Use disaggregated

data. Trade balance is not unitfree

Moffett (1989)

1967-1987
Quarterly

Finds evidence of the J-Curve

Quarterly
1970-1985

Finds evidence for J-curve

1974-1983

Finds evidence of a inverse JCurve

Quarterly
1977-1988

Evidence of a delayed J-curve

for Australia; depreciation of
Australian real effective
exchange rate improves her
trade balance

Noland (1989)

Karadeloglou
(1990)

BahmaniOskooee and
Pourheydarian
(1991)

BahmaniOskooee and
Malixi (1992)

USA with her six G-7

Yus,t = US real GNP, Yjt = real
trading partners:
GNP (or GDP) in j; and
Canada, France,
REXjt = the real exchange rate
Germany, Italy, Japan,
of US $ vis- -vis j' s currency
and UK
Simulation based on price
Time series
and quantity equations that
US Trade Balance
USA
Simulation
include relative prices and
activity variables
Incomes in each country (Yj,
Export demand and Y*); the price levels in both
Time series 2 SLS
supply equations
(Pj, P*); and the rest of the
gamma distributed
Japan
Import demand
world export price and
lag
equation
domestic price of imports
(PX*, PMj)
Time series
Consumption, private Demographic variables,
Simulations of the investment, imports, government expenditure,
Macro- econometric exports, inventory
foreign demand, foreign
Greece
(MYKL) model of changes, prices,
export prices, the monetary
the Greek economy wages, etc.
sector, exchange rate
GNP (Yt), world income
(YWt), domestic high
powered money (Mt), world
Time series Almon
high-power money (MWt),
lag structure
(X - M)t in real terms real effective exchange rate E Australia
imposed on real
*PW/P, where Pt = domestic
exchange rate
price level, PWt = world price
level, Et = effective exchange
rate
Time series Almon (X - M)t in real terms GNP (Yt), world income
Brazil, Dominican
lag structure
(YWt), domestic high
Republic, Egypt,
imposed on real
powered money (Mt), world Greece, India, Korea,

Frequency,
time period

Quarterly
1973-1985

While they find support for

the J-curve for Brazil, Greece,
Korea, India, they also report,

Author (year)

Main regression

Dependent variable

Relevant explanatory
variables

Countries

Frequency,
time period

high-power money (MWt),

real effective exchange rate E
Mexico, Pakistan, Peru,
*PW/P, where Pt = domestic
Philippines, Portugal,
price level, PWt = world price
Thailand, and Turkey
level, Et = effective exchange
rate

exchange rate

Remarks
in line with Magee (1973),
shapes such as the N-, the M-,
and the I-Curves, and
conclude that the short-run
effects may not follow a
standard pattern, though the
long-run effects are favourable
in most cases
Finds evidence of a delayed Jcurve. Also reports strong
causal links between the
nominal and real exchange
rates and export volumes; no
causal links between the
nominal and real exchange
rates and import

Mahdavi and
Sohrabian
(1993)

Nominal trade
Time series Granger balance, import
Nominal and Real exchange
US
Causality tests
prices and volumes, rate
exports

Quarterly
1973-1989

BahmaniOskooee and
Alse (1994)

Time series EngleGranger

M/X
cointegration
technique

Quarterly data Report occurrence of the Jfrom 1971 to Curve for Costa Rica, Ireland,
1990
Netherlands, and Turkey

Backus, Kehoe
and Kydland
(1994)

Demirden and
Pastine (1995)

Time series Cross(X - M)/GNP

correlation Function

Time series Vector

autoregression
(VAR)

19 developed and 22
Real effective exchange rate less developed
countries

Terms of trade, defined as

imports price deflator over
exports price deflator

Vector of trade
balance (measured by Lags of the trade balance,
net exports to GDP real exchange rate, and
ratio), real exchange domestic and foreign
rate, and domestic
incomes
income

Austria, Canada,
Finland, France'
Germany' Italy, Japan,
Switzerland, UK, and
USA

USA

Quarterly
The lead and lag correlation
1950-1993 for between terms of trade and net
some countries, exports is S-shaped However,
smaller
the curves for Austria,
samples for
Canada, and the USA are
others
rather weak
A 2.5% one-time depreciating
shock results in a five-quarter
negative response in the US
balance of trade followed by a
substantial and fairly longQuarterly
lasting improvement in the
1978-1993
balance of trade. Thus,
feedback effects may be
significant and should be
explicitly incorporated in
future research

Author (year)

Main regression

Dependent variable

Relevant explanatory
variables

Terms of trade (Tt), domestic

and foreign incomes (It and Australia
, respectively),

Hoque (1995)

Time series
Cointegration
Analysis

Current account
deficit (CDt)

Zhang (1996)

Time series,
Cointegration
analysis, Granger
causality

Real trade balance (X

Real exchange rate
- M)

Marwah and
Klein (1996)

Time series IV and

X/M
OLS

Time series
Johansen and
Shirvani and
Jusilius
Wilbratte (1997)
cointegration
technique

Senhadji (1998)

Gupta-Kapoor
and
Ramakrishnan
(1999)
BahmaniOskooee and
Brooks (1999)

Bilateral trade
balance with US =
X/M

Time series Cross(X - M)/GNP

correlation Function

Countries

Volume of world trade Real

Exchange Rate

China

(YN and
), the
nominal effective
exchange rate
(NEER)
Time series ARDL M/X
approach:
cointegration and

Quarterly
1974-1983

Remarks
Terms of trade, domestic and
foreign incomes are
cointegrated with the current
account deficit during the
fixed exchange rate regime
(1965Q1-1974Q3). Does not
investigate the short-run
dynamics (i.e., the J-Curve)

Monthly 1991No support for the J-curve

1996

Canada and USA with Quarterly

their five largest trading 1977Q1partners
1992Q1

Find support for the J-Curve.

Use disaggregated data and
non-stationary variables

Yt = domestic real income,

US with her six trading

Monthly
Find support for the L-Curve.
= foreign real income; partners: Canada,
France,
Germany,
Italy,
1973:1
-1990:8
Use bilateral trade data
and REXjt = the real exchange
Japan
and
UK
rate
Terms of trade, defined as
imports price deflator over
exports price deflator

30 LDCs

Annual 19601993 for most

The lead and lag correlation
countries,
between terms of trade and net
smaller
exports is S-shaped
samples for
others

Japan

Quarterly
1975-1996

Trade balance (M/X),

nominal domestic
Trade balance (M/X),
and foreign incomes nominal domestic and foreign
Time series VAR

Frequency,
time period

incomes (YN and

), the
nominal effective exchange
rate (NEER)

Yus,t (Yjt) = the index of US

US with her six trading Quarterly
(country j' s) real GDP REXjt partners: Canada,
1973Q1= the bilateral real exchange France, Germany, Italy, 1996Q2

Finds evidence of J-Curve

No specific short-run pattern

supporting the J-curve
phenomenon A real

Author (year)

Main regression

Dependent variable

error correction
modelling

Wilson (2001)

Time series EngleGranger, Johansen's

Cointegration and (X - M)/CPI
error-correction
modelling.

Baharumshah
(2001)

Time series.
Unrestricted VAR
model

Time series ARDL

approach:
cointegration and
error correction
modelling
Time series
Johansen's
Lal and
cointegration and
Lowinger (2002)
error-correction
modelling
Time series VAR
Lee and Chinn approach and
(2002)
impulse response
function
BahmaniOskooee and
Kanitpong
(2001)

Relevant explanatory
Countries
variables
rate between US dollar and j'
s currency (a decrease
Japan, and UK
reflects a real depreciation of
the dollar against j' s currency
Singapore, Malaysia
Domestic income, foreign
and Korea. Trading
income and real bilateral
partners for each
exchange rate.
country are selected to
be the USA and Japan
Malaysia and Thailand.
Domestic income, foreign
Trading partners for
income and the real bilateral each country are
exchange rate
selected to be the USA
and Japan
Thailand with five
Domestic income, foreign
trading partners that
income and the real bilateral include Germany,
exchange rate
Japan, Singapore, UK
and USA

Frequency,
time period

Remarks
depreciation of the dollar has a
favourable long-run effect on
US trade balance

Quarterly
1970-1996

No evidence of cointegration
and no evidence of J-curve
phenomenon

Quarterly
1980-1996

No evidence of the J-curve

Quarterly
1984-1997

Supports J-curve in two out of

five cases

Ln (M/X)

Domestic income, world

income and real effective
exchange rate

Indonesia, Japan,
Korea, Malaysia, the Quarterly
Philippines, Singapore 1980-1998
and Thailand

They confirm the J-curve and

show that there are significant
differences in the duration and
extend of the J-curve effect
across countries

Current
Account/GDP

Exchange rate

Canada, France,
Quarterly
Germany, Italy, Japan,
1979-2000
UK, USA

No support for the J-curve

Ln (X/M)

Ln (X/M)

Time series ARDL

Bahmaniapproach to
Oskooee and
cointegration and
Ln (X/M)
Goswami (2003) error-correction
modelling

Domestic income, trading

partner's income and real
bilateral exchange rate

Arora, Bahmani- Time series ARDL Ln (X/M)

Domestic income, trading

Japan with each of her

trading partners that
include Australia,
Canada, France,
Quarterly
Germany, Italy,
1973-1998
Netherlands,
Switzerland, UK and
USA
India with each of her Quarterly

Evidence supports the J-curve

in some cases. The long-run
effects of currency
depreciation is found to be
favourable
A new concept of the J-curve

Author (year)

Main regression

Dependent variable

Relevant explanatory
variables

approach to
Oskooee and
cointegration and
Goswami (2003) error-correction
modelling

partner's income and real

bilateral exchange rate

Hacker and
Time series Impulse
Ln (X/M)
Hatemi-J. (2003) response function

Domestic income, trading

partner's income and real
bilateral exchange rate

Time series ARDL

approach to
cointegration and
Ln (X/M)
error-correction
modelling

Domestic income, trading

partner's income and real
bilateral exchange rate

BahmaniOskooee and
Ratha (2003a)

Time series
ARDL approach
BahmaniOskooee and to cointegration Ln (X/M)
Ratha (2003b) and errorcorrection
modelling

Countries

Frequency,
time period

trading partners that

include Australia,
1977-1998
France, Germany, Italy,
Japan, UK and USA
Belgium, Denmark,
Quarterly and
The Netherlands,
Monthly 1977Norway, Sweden
2000
USA with 18 trading
partners that include
Australia, Austria,
Belgium, Canada,
Quarterly
Denmark, Finland,
1975Q1Germany, Ireland, Italy,
2000Q4
Japan, Netherlands,
New Zealand, Norway,
Spain, Sweden,
Switzerland, UK

USA with 13
Trading partners
that include
Domestic income,
Argentina, Chile,
Quarterly
trading partner's income Ecuador, India,
1975Q1and real bilateral
Indonesia, Israel,
2000Q2
exchange rate
Korea, Malaysia,
Mexico, Nigeria,
Pakistan, Singapore
and South Africa

Remarks
is supported in the bilateral
trade between India and
Australia, Germany, Italy and
Japan
Supportive of the J-Curve

Results support a new

definition of the J-curve in 11
out of 18 cases

Results support a new

definition of the J-Curve
in 7 out of 13 cases