THE J-CURVE EFFECT FOR BILATERAL TRADE BETWEEN THE REPUBLIC OF NORTH MACEDONIA AND ITS LARGEST TRADING PARTNERS
THE J-CURVE EFFECT FOR BILATERAL TRADE BETWEEN THE REPUBLIC OF NORTH MACEDONIA AND ITS LARGEST TRADING PARTNERS

Summary/Abstract: This paper aims to analyse the presents of the J-curve effect for bilateral trade between The Republic of North Macedonia and its largest trading partners, namely: Germany, Greece, Bulgaria, Belgium, Serbia, Great Britain, Italy, Turkey, USA and Poland. According to the theory, the devaluation of the domestic currency is expected to initially worsen the trade balance and then improve it and so forming a curve in the form of the letter J. The empirical analysis using quarterly data from q1-1997 to q4-2021 will be performed by the ARDL model as a more appropriate econometric model to analyse the impact of the exchange rate on bilateral trade between the Republic of North Macedonia and its trading partners for the short and long-run relationship. The results suggest that only in three of ten trading partners exchange rate seems to have a long-run effect and only with two have a short-run effect. Based on the results, the existence of the J-curve was found only in bilateral trade with North Macedonia and Belgium.

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