Impact of the exchange rate to trade balance between Serbia and Eurozone: the J curve effect

Petrović, Predrag (2016) Impact of the exchange rate to trade balance between Serbia and Eurozone: the J curve effect. Teme, 40 (3). pp. 1051-1067. ISSN 0353-7919 eISSN 1820-7804

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Abstract

This paper is dedicated to the research of the effects of the J curve in the scope of Serbia – Eurozone trade balance in the period between 2006 and 2014. The analysis has been conducted based on the concept of time series cointegration, using АRDL bounds testing approach, after which the robustness of the obtained findings was checked by estimation of the ARDL model at the level of first differences. The obtained results provide for quite reliable proofs that the J curve effects exist between Serbia and Eurozone, i.e. that short-term influence of real exchange rate to trade balance is negative, while long-term one is positive. These findings are quite reliable, although they are not completely confirmed through the estimation of the ARDL model at the first difference levels, since the testing has been conducted using critical values simulated for small samples.

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