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Dynamics of the asymmetric S-curve between Pakistan and Japan

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Abstract

The hypothesis of the S-curve concept demonstrates that the correlation between past values of the trade balance and the current exchange rate could be negative, there may also be a positive association between future values of the trade balance and the current exchange rate. Previous studies focusing on the empirical S-curve were thought to have an aggregation bias since they assumed that both appreciation and depreciation have symmetry in cross-correlation with both the current and future value of trade balance. The current study explores the asymmetric S-curve between Pakistan and Japan at the commodities level. Using the S-curve concept, this study classified real exchange rates into two components (appreciation and depreciation) and attempted to determine whether the response of exchange rate movement is symmetric or asymmetric on the trade balance. The findings come up with significant support in favor of the "asymmetric S-curve" in eleven, out of fifteen industries. The findings are crucial in analyzing the behavior of the exchange rate appreciation and deprecation with the past and future values of trade balance at the industry level.

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Authors and Affiliations

  1. School of Economics, Quaid-i-Azam University, Islamabad, Pakistan

    Sareer Ahmad

  2. School of Economics, Quaid-i-Azam University Islamabad and Fulbright Postdoc Fellow, University of Nebraska at Omaha, Omaha, NE, USA

    Javed Iqbal

  3. Department of Economics, Hazara University Mansehra, Pakistan and Postdoc Fellow, University of Nebraska at Omaha, Omaha, NE, USA

    Misbah Nosheen

  4. College of Business, University of Nebraska at Omaha, Omaha, NE, USA

    Mark Wohar

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  1. Sareer Ahmad
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  2. Javed Iqbal
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Correspondence to Mark Wohar.

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Ahmad, S., Iqbal, J., Nosheen, M. et al. Dynamics of the asymmetric S-curve between Pakistan and Japan. IJEPS 17, 551–561 (2023). https://doi.org/10.1007/s42495-023-00112-0

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