Page 74 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

Further, Wilson (2001) argued that there is no evidence to suggest that

the trade balance for Singapore and Malaysia with the USA and Japan
follows the J-curve phenomenon, while Korea’s trade balance with

respect to both the US and Japan followed the J-curve phenomenon.
Conventionally, the J-curve estimation has been done using time-

series econometrics. In particular, the traditional Johansen approach to

co integration and error correction modeling (ECM) has been widely
used. Gupta-Kapoor and Ramakrishnan (1999) estimated the J-curve for

Japan employing the Johansen-Juselius method. Bahmani-Oskooee an
Alse (1994) studied the relationship between the trade balances and the

real effective exchange rate (REER) for many countries using the error

correction methodology. Haliciouglu (2008) examined the Turkish J-
curve with the Pesaran’s autoregressive-distributed lag model (ARDL).

The Engel-Granger approach has also been used by various researchers.
The majority of studies have employed aggregated data. Beginning with

Rose and Yellen (1989), however, there has been a rise in disaggregated,
or bilateral, estimation. Some of the more recent J-curve studies include

Onafowora (2003), Hacker and Hatemi (2004), Narayan (2004), Moura

and Da Silva (2005), Bahmani-Oskooee et al. (2006). For a thorough
literature review, consult Bahmani-Oskooee and Ratha (2004) who

provide a very extensive analysis on the J-curve literature from 37
articles for the period of 1973-2003.

The main motivation for undertaking this research study is that no
empirical work on the Azerbaijani J-curve has been done before. The

case of Azerbaijan is particularly interesting because the country

experienced an export-driven economic boom in the mid-late 2000s
when the nation was growing at a double-digit rate. The national

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