Purpose – To avoid aggregation bias by using trade data at bilateral level so that we can determine how sensitive are Britain’s inpayments and outpayments to the value of the British pound.Design/methodology/approach – The method is based on the bounds testing approach to cointegration and...

Previous research that investigated the relationship between the black market and the official exchange rate employed cointegration analysis to establish the long-run relationship and Granger causality to detect the short-run causality between the two rates (for a small number of countries). In...

In a recent article, with a strong theoretical argument but poor empiricalsupport, military spending was identified to be a determinant of realexchange rate or a factor causing the PPP to deviate from equilibriumexchange rate. The poor empirical results were mostly due to a small numberof...

Several studies have tested the J-curve phenomenon for Australia using non-stationary aggregate trade data and have provided mixed results. They not only suffer from the 'aggregation bias problem' but also from the 'spurious regression problem'. To overcome these problems, in this paper we...

Testing purchasing power parity (PPP) in the black market has increased in recent years due to the apparent puzzle in the literature by which PPP is largely rejected in flexible exchange rate regimes. Many studies of PPP suffer from the problem of imposing symmetry and proportionality...

Recently the impact of institutional factors on macro variables has been gaining momentum. Researchers have investigated the impact of corruption, law and order, and bureaucracy on economic growth, inflation, investment, productivity, and the real exchange rate. In this article, we investigate...

A limited number of studies have tested the J-Curve phenomenon using bilateral trade data between the United States and its major trading partners. In this paper, we test the J-Curve hypothesis by using quarterly bilateral data over the 1973-98 period between Japan and its nine major trading...