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Intertemporal Prices and the U.S. Trade Balance

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  • Burda, Michael C
  • Gerlach, Stefan

Abstract

The deterioration of the U.S. merchandise trade deficit in the 1980s fell mostly on durable goods. Using a representative-agent model, the authors show that the key distinction between the trade balance in nondurables and durables is the role of intertemporal prices in the latter. A decrease in intertemporal prices associated, for example, with an exchange-rate overvaluation should, therefore, be expected to worsen the trade balance in durables more than in nondurables. This interpretation of the compositional changes of the U.S. trade balance is supported by their econometric findings. Copyright 1992 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 82 (1992)
Issue (Month): 5 (December)
Pages: 1234-53

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Handle: RePEc:aea:aecrev:v:82:y:1992:i:5:p:1234-53

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Cited by:
  1. Erceg, Christopher J. & Guerrieri, Luca & Gust, Christopher, 2008. "Trade adjustment and the composition of trade," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2622-2650, August.
  2. Carone, Giuseppe, 1996. "Modeling the U.S. demand for imports through cointegration and error correction," Journal of Policy Modeling, Elsevier, vol. 18(1), pages 1-48, February.
  3. Andrew M. Warner, 1992. "Import demand and supply with relatively few theoretical or empirical puzzles," International Finance Discussion Papers 433, Board of Governors of the Federal Reserve System (U.S.).
  4. Boileau, Martin, 1999. "Trade in capital goods and the volatility of net exports and the terms of trade," Journal of International Economics, Elsevier, vol. 48(2), pages 347-365, August.
  5. Lee, Jaewoo, 1998. "Intertemporal substitution in imported durables," Journal of International Economics, Elsevier, vol. 44(1), pages 113-133, February.
  6. Yuki Teranishi & Ippei Fujiwara & Naoko Hara, 2004. "The Japanese Economic Model: JEM," Econometric Society 2004 Far Eastern Meetings 723, Econometric Society.
  7. M Bahmani-Oskooee & M Kovyryalova, 2008. "The J-Curve: Evidence from Industry Trade Data between US and UK," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 25-44, March.
  8. Breuer, Janice Boucher & Clements, Leianne A., 2003. "The commodity composition of US-Japanese trade and the yen/dollar real exchange rate," Japan and the World Economy, Elsevier, vol. 15(3), pages 307-330, August.
  9. Andrew M. Warner, 1992. "Does world investment demand determine U.S. exports?," International Finance Discussion Papers 423, Board of Governors of the Federal Reserve System (U.S.).
  10. Tarlok Singh, 2007. "Intertemporal Optimizing Models Of Trade And Current Account Balance: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 25-64, 02.
  11. M Bahmani-Oskooee & A Ratha, 2009. "S-Curve Dynamics of Trade: Evidence from US-Canada Commodity Trade," Economic Issues Journal Articles, Economic Issues, vol. 14(1), pages 1-16, March.
  12. Singh, Tarlok, 2004. "On the optimizing model of the balance of trade in India," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 605-625, July.

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