Revista de Economía y Negocios

Asymmetric Effect, Non-Linear ARDL and the J-Curve Analysis among EAC Members

Abstract

Masoud Mohammed Albiman

Until recently, the empirical evidence on asymmetric effect of exchange rate and its transmission channels on trade balance is still very scarce, especially for least developed countries. This article attempts to explore symmetric effect of exchange rate and its transmission channels on trade balance. The recently developed method of Non-linear ARDL were utilized for Quarterly data from 1990 Q1 to 2017 Q4 in unexplored areas of East African Community (EAC-5) members. The study found presence of robust symmetric and asymmetric negative effect of exchange rate changes to trade balance only in Uganda, both in short run and long run. Meanwhile, there was no evidence of robust J-curve phenomena within EAC members. In addition to that, exchange rate changes (depreciation and appreciation) improve the trade balance only in Tanzania through domestic income level. Generally, the application of exchange rate policy in improving trade imbalance is doubted within EAC region.