This thesis studies the relationship between the trade balance ratio between Sweden and Norway and the real exchange rate. Following a real depreciation of the Swedish crown (SEK) against the Norwegian krone (NOK), the trade balance ratio of Swedish exports to Norway to Swedish imports from Norway (X/M), is expected to initially fall due to lower earnings from the exports and higher expenses associated with imports. As the goods become cheaper, the demanded quantity is expected to increase, which is how the J-curve appear. J-curve builds on the Marshall-Lerner theory, which says that if the sum of price elasticities of exports and imports is elastic, the Swedish trade balance will improve as a result of the real depreciation of SEK. A test for cointegration is performed to see if there is a significant long-run relationship between the variables. This relationship is studied at two different frequences of observations, quarterly and annually. Then the Autoregressive Distributed Lag model, ARDL is used to analyse the J-curve. One of the conclusions of the results is that although no significant relationship could be found at monthly or quarterly observations, there is a J-curve present at annual level.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:lnu-130245 |
| Date | January 2024 |
| Creators | Nostell, Carl |
| Publisher | Linnéuniversitetet, Institutionen för nationalekonomi och statistik (NS) |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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