Pages: (12-32 )
Abstract
The literature of trade balance and exchange rate devaluation have enjoyed enormous reviews with different decays ranging from aggregation bias, specification bias to the exclusion of effects of structural breaks on bilateral trade flows. This motivates this study to investigate the J-curve phenomenon for bilateral trade between Nigeria and her ten trading partners through linear and nonlinear ARDL models. We found evidence of asymmetric relationship for three trading partners while others support symmetric influence. However, the linear models support presence of J-Curve phenomenon for four trading partners while only Brazil comport with the asymmetric J-curve among all the nonlinear models. Also, the result lends supportive evidence on the importance of structural breaks in J-Curve modelling. These findings are relevant for policy implications on monetary policies of exchange rate management, as well as export promotion strategies.
Keywords: J-Curve; Bilateral trade model; Structural breaks; Real exchange rate devaluation,