Abstract
This study examines the J-curve hypothesis in Afghanistan (Afg) and its major trading partners, such as China (Chn), India (Ind), Iran (Irn), and Pakistan (Pak), using a set of well-known predictors to inform model specification. Using both linear and non-linear autoregressive distributed lags (ARDL) methods to test the symmetric and asymmetric effects of the J-curve phenomenon, the initial findings confirm a long-run symmetric nexus amid predictors. The results obtained from both the linear and non-linear ARDL estimates strongly support the J-curve effects in the Afg-Ind and Afg-Pak models, while they indicate otherwise for the Afg-Chn model. Further analysis reveals that the J-curve hypothesis symmetrically exists in the Afg-Irn model. Moreover, using the dynamic multiplier approach to delve into the asymmetric effects of the bilateral real exchange rate on the trade balance, the findings indicate that due to stylized facts, both positive and negative partial sum shocks from the bilateral real exchange rate are significant to retain the J-curve effects in the Afg-Pak model, while little evidence supports the significance of the J-curve for other three trading partners. Based on the findings, appropriate policy recommendations are discussed.
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Data availability
The dataset relevant to Afghanistan and its trading partners used in this study was collected from Asian Development Bank and World Development Indicators sources. Bilateral trade, trade balance, and bilateral real exchange rate data are gathered from the Asian Development Bank and are available at https://kidb.adb.org/, while nominal GDP and GDP Deflator data are gathered from the World Development Indicators (https://databank.worldbank.org/source/world-development-indicators).
Code availability
For analysis purposes, Stata 17, Eviews 12, and Oximetric 7 are used. The codes are freely available for ARDL, NARDL, and dynamic multipliers both in Stata and Eviews packages.
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The introduction part of the study is written by MMS, while the remaining parts of the study have been written and completed by MNA. Therefore, MNA is the main contributor of this study. Both authors have read and approved the manuscript.
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Azimi, M.N., Shafiq, M.M. The J-curve phenomenon in Afghanistan and its major trading partners: evidence from a non-linear ARDL approach. SN Bus Econ 2, 61 (2022). https://doi.org/10.1007/s43546-022-00239-w
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DOI: https://doi.org/10.1007/s43546-022-00239-w