Is the J-Curve Effect Observable for Small North European Economies?
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The present study tests for the J-curve for five North European countries—Belgium, Denmark, The Netherlands, Norway, and Sweden—using generalized impulse response functions. The results provide empirical support for the J-curve. Each country has an impulse response function generated from a vector error-correction model that suggests that after a depreciation, there will be a dip in the export-import ratio within the first half-year after the depreciation. The long-run export-import ratio appears to be higher than the low point of this early dip in almost all cases. Also, in most cases, the export-import ratio appears in many periods after the depreciation to be converging from below to a higher long-run equilibrium.
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