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The J-Curve: a literature review

2004; Taylor & Francis; Volume: 36; Issue: 13 Linguagem: Inglês

10.1080/0003684042000201794

1466-4283

Mohsen Bahmani‐Óskooee, Artatrana Ratha,

Financial Risk and Volatility Modeling

Abstract Due to lag structure, currency devaluation is said to worsen the trade balance first and improve it later resulting in a pattern that resemble the letter J, hence the J-Curve phenomenon. Since its introduction by Magee in (Brooking Papers on Economic Activity, 1, pp. 303–25), a large number of studies have attempted to test the phenomenon using different techniques and different model specifications. The results are at best ambiguous and deserve to be collected together for the future generation of researchers and graduate students. This paper fills such a vacuum in the literature by reviewing the J-Curve related empirical papers. Acknowledgements We are grateful for valuable comments of an anonymous referee. However, we alone are responsible for any error.