Empirical investigation of the S-curve phenomenon in Pakistan-China commodity trade

This study investigates the short-term effects of currency depreciation on the trade balance between Pakistan and China, with a specific emphasis on analyzing the industry-level S-curve phenomenon. Employing a quantitative research design and utilizing time-series data, the research employs correlation analysis to explore the presence of the S-curve phenomenon across 26 industries. The findings highlight the industry-specific nature of the S-curve phenomenon, underscoring the insufficiency of currency devaluation as a standalone strategy for maintaining a stable trade balance. Consequently, policymakers are advised to consider industry-level factors when formulating trade policies. This study challenges the conventional use of the Consumer Price Index (CPI) in aggregate settings, where its inclusion of diverse goods frequently leads to misleading results. Instead, we take a novel approach by developing a commodity-based CPI tailored to bilateral trade between countries. The findings have practical relevance in guiding policy decisions regarding commodity trade, while the industry-wise analysis enriches the understanding of the short-term effects of currency depreciation on trade balance dynamics.