Asymmetry cointegration and the J-curve: new evidence from Korean bilateral trade balance models with her 14 partners

Introduction of new econometric methods raises interest in assessing the old theories and the J-curve phenomenon is no exception. Like previous research, we first use the linear autoregressive distributed lag (ARDL) approach to investigate the phenomenon between Korea and each of her 14 trading partners. We then employ the recent nonlinear ARDL approach to show that in most cases, exchange-rate changes have short-run and long-run asymmetric effects on bilateral trade balances. Separating depreciations from appreciations, which is the main feature of the nonlinear model, relies upon nonlinear adjustment of the exchange rate and provides relatively more support for the J-curve effect.