Test of the bilateral trade J-curve between the USA and Australia, Canada, New Zealand and the UK

This paper examines the J-curve hypothesis for Australia, Canada, New Zealand and the UK. Applying the vector error correction model and the generalised impulse response function, this study finds that the trade balance reacts to real depreciation in several different patterns in the short run. There is lack of support for a J-curve for Australia, Canada, and the UK. In the long run, real depreciation improves the trade balance for Australia, Canada, and New Zealand and does not influence the trade balance for the UK.