Examining the J-curve and S-curve patterns in Pakistan’s economic ties with the USA and China; the world’s economic giants

Jin Jing; Riaz Ahmad; Sahibzada  Muhammad Usman; Javed Iqbal; Sareer Ahmad; Azeem  Gul; Hong Mi; Zhainagul Abdirasulova; Ravshanbek Dzhumaev Mamadievich

doi:10.15611/aoe.2025.2.15

Authors

Jin Jing Qilu Institute of Technology https://orcid.org/0009-0003-2634-1778
Riaz Ahmad ✉️ Qilu Institute of Technology
drriaz@zju.edu.cn https://orcid.org/0000-0001-9366-7223
Sahibzada Muhammad Usman Shandong University at Weihai https://orcid.org/0000-0003-1231-7040
Javed Iqbal Quaid-i-Azam University https://orcid.org/0000-0002-0336-6484
Sareer Ahmad Quaid-i-Azam University https://orcid.org/0000-0003-4698-1273
Azeem Gul National University of Modern Languages https://orcid.org/0000-0003-0760-7772
Hong Mi Zhejiang University https://orcid.org/0000-0002-8623-2982
Zhainagul Abdirasulova Osh State University https://orcid.org/0000-0003-4440-558X
Ravshanbek Dzhumaev Mamadievich Osh International Medical University https://orcid.org/0009-0006-2129-4943

DOI:

https://doi.org/10.15611/aoe.2025.2.15

Keywords:

the USA, S-curve, J-curve, China, currency depreciation, 3-digit industries, Pakistan

Abstract

Aim: Since the Jand S-curve concepts were first introduced, several researchers have tried to test their validity through empirical research. To offer recommendations for additional research, this study looked at the relevant literature.

Methodology: The idea of the S-curve is an extension of the J-curve, which shows how the trade balance improves over time despite initially being worse due to currency depreciation. According to the S-curve hypothesis, there is a positive cross-correlation between the current exchange rate and the future trade balance of a country, and a negative cross-correlation between the current exchange rate and the past trade balance. To understand the pattern of the relationships, the author considered time series data for fifteen 3-digit industries/commodities between Pakistan and its main trading partners – China and the USA – from 1980 to 2022.

Results: The results demonstrate that the minority of Pakistani industries, engaged in trade with the USA and China, supported J and S-curves behaviour.

Implications and recommendations: The study showed that improving the trade balance is not always possible with domestic currency devaluation.

Originality/Value: This study made an incremental contribution in that it critiqued a consumer price index (CPI) which has been used in literature on the aggregate level, and constructed commodity-based CPI for the analysis.

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