The US State-Level Geographic J-curve Hypothesis Mapping with Canada.

Area of Science:

• Economics
• International Trade
• Econometrics

Background:

• The J-curve effect describes how a country's trade balance initially worsens before improving after a currency depreciation.
• Asymmetric J-curve hypothesis suggests this effect varies across regions or trading partners.
• Understanding state-level trade dynamics with Canada is crucial for US economic policy.

Purpose of the Study:

• To create a visual, US state-level map testing the asymmetric J-curve hypothesis for bilateral trade with Canada.
• To identify US states where trade balance adjustments align with the J-curve effect.
• To provide policy recommendations for states not exhibiting the J-curve effect.

Main Methods:

• Development of a US state-level asymmetric J-curve hypothesis testing map.
• Visual representation of how US state policymakers manage bilateral trade balances with Canada.
• Empirical analysis to determine which states support the asymmetric J-curve hypothesis.

Main Results:

• The asymmetric J-curve hypothesis is supported for only 15 US states and the District of Columbia.
• These states are visually represented in green on the map.
• Red and gray states indicate a lack of support for the hypothesis.

Conclusions:

• Policymakers in the 15 green states may implement more sustainable bilateral trade policies with Canada.
• Policymakers in red/gray states should reassess trade regulations, including taxation and energy prices.
• Reevaluation may help red/gray states achieve positive J-curve outcomes and increase exports to Canada.