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Keywords:

  • Trade J-curve;
  • transitional economies;
  • Central Europe;
  • generalized impulse response functions;
  • vector error correction model

Abstract

Using generalized impulse response functions, this study tests for the trade J-curve for three transitional central European countries – the Czech Republic, Hungary, and Poland – in their bilateral trade with respect to Germany. Our findings suggest that for each country there are some characteristics associated with a J-curve effect: after a (real or nominal) depreciation the export-to-import ratio briefly drops to below its initial value within a few months and then rises to a long run equilibrium value higher than the initial one.