Incomes, Exchange Rates and the US Trade Deficit, Once Again
AbstractThe chronic and expanding US trade deficit has refocused attention upon the responsiveness of trade flows to exchange rate and income changes. I estimate import and export equations over a period spanning the 1990s New Economy boom and the subsequent recession and dollar depreciation. The results indicate (1) a low responsiveness of imports to exchange rate changes, and (2) a diminution (but not disappearance) of the income elasticity asymmetry first noted by Houthakker and Magee. The combination of low price elasticity of imports with the present size of the trade deficit means that any reduction of the trade deficit will necessarily be accompanied by large exchange rate and income trend adjustments. Copyright Blackwell Publishing Ltd. 2004
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal International Finance.
Volume (Year): 7 (2004)
Issue (Month): 3 (December)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271
Other versions of this item:
- Chinn, Menzie, 2002. "Incomes, Exchange Rates and the U.S. Trade Deficit, Once Again," Center for Global, International and Regional Studies, Working Paper Series qt0tc442fc, Center for Global, International and Regional Studies, UC Santa Cruz.
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