Is there a J-curve effect in commodity trade between sweden and germany

Recent empirical work in international finance has focused on the impact of currency fluctuations on major trade partners' trade balances, for individual commodities rather than at broader levels of aggregation. As both an important source of Sweden's imports and a key export destination, Germany's commodity trade is particularly worthy of further analysis. In this study, we investigate these countries' bilateral trade for 124 industries, over the period from 1963 to 2009, using cointegration analysis. We find little support for any "J-curve," which is the idea that a slow adjustment process leads to an immediate deterioration of a country's trade balance following a depreciation before it eventually improves. We do find that, of the 65 cointegrated industries, 30 show a long-run improvement after a depreciation of the krona. These include many of the sample's largest industries. JEL Classification: F31.