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Empirica

, Volume 40, Issue 2, pp 237–257 | Cite as

Currency fluctuations and the French–U.S. trade balance: evidence from 118 industries

  • Mohsen Bahmani-OskooeeEmail author
  • Hanafiah Harvey
  • Scott W. Hegerty
Original Paper
  • 223 Downloads

Abstract

The impact of currency depreciations on trade has inspired a large body of research. Recent studies have examined industry-level trade, often using cointegration analysis, finding that a significant fraction of industries respond positively to devaluations. Oftentimes, adjustment lags result in a “J curve” effect, where devaluations hurt the trade balance temporarily. This study examines the specific case of trade between the United States and France, but finds that these flows are less sensitive than has been shown for other country pairs. Only 30 of 118 industries see increased trade balances after a dollar depreciation, and virtually none follow any type of a “J curve.” Certain industry sectors are more sensitive than others, however. Examining the SITC classifications of those 30 industries, we find that many of them are clustered in the SITC 700 (Machinery and Transport Equipment) and 800 (Miscellaneous Manufactured Articles) categories. In particular, clothing and footwear, as well as electrical equipment, are particularly affected.

Keywords

Industry trade Bounds testing United States France 

JEL Classification

F31 

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Mohsen Bahmani-Oskooee
    • 1
    Email author
  • Hanafiah Harvey
    • 2
  • Scott W. Hegerty
    • 3
  1. 1.Center for Research on International EconomicsUniversity of Wisconsin-MilwaukeeMilwaukeeUSA
  2. 2.Department of EconomicsPenn State UniversityMont AltoUSA
  3. 3.Department of EconomicsNortheastern Illinois UniversityChicagoUSA

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