S-curve dynamics of trade between Sweden and her trading partners

The S-curve sums up the dynamic relationship between terms of trade and trade balance. This pattern has received weak support in some developed and less developed countries when aggregate trade data are used. Empirical regularities based on aggregate trade data can be biased since aggregation can potentially suppress some of the patterns observed in trade at the bilateral level. This paper overcomes this problem by employing bilateral trade data from Sweden and finds that the S-curve is invariant to this level of disaggregation. Indeed, Sweden has a bilateral S-curve with 12 out of 17 cases examined for the 1980Q1-2005Q1 period.

► The S-curve posits that while past values of the trade balance are negatively correlated with current exchange rate, their future values are positively correlated. ► In this paper we examine the S-curve dynamics of trade between Sweden and her 17 trading partners. ► Quarterly data over the period 1980-2005 are used to carry out the estimation. ► The S-curve pattern is supported in 10 out of 17 cases.