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
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal International Finance.
Volume (Year): 7 (2004)
Issue (Month): 3 (December)
Contact details of provider:
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.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Catherine L. Mann, 1999. "Is the U.S. Trade Deficit Sustainable?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 47.
- Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
- Robert Z. Lawrence, 1990. "U.S. Current Account Adjustment: An Appraisal," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 343-392.
- Ellen E. Meade, 1991.
"Computers and the Trade Deficit: The Case of the Falling Prices,"
in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 61-88
National Bureau of Economic Research, Inc.
- Ellen E. Meade, 1990. "Computers and the trade deficit: the case of the falling prices," International Finance Discussion Papers 378, Board of Governors of the Federal Reserve System (U.S.).
- Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Finance and Economics Discussion Series 2000-35, Board of Governors of the Federal Reserve System (U.S.).
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Maurice Obstfeld & Kenneth Rogoff, 2000.
"Perspectives on OECD economic integration : implications for U.S. current account adjustment,"
Proceedings - Economic Policy Symposium - Jackson Hole,
Federal Reserve Bank of Kansas City, pages 169-208.
- Obstfeld, Maurice & Rogoff, Kenneth, 2000. "Perspectives on OECD Economic Integration: Implications for US Current Account Adjustment," Center for International and Development Economics Research, Working Paper Series qt16z3s2s2, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Maurice Obstfeld & Kenneth Rogoff, 2001. "Perspectives on OECD Economic Integration: Implications for US Current Account Adjustment," International Trade 0012004, EconWPA.
- Maurice Obstfeld and Kenneth Rogoff., 2000. "Perspectives on OECD Economic Integration: Implications for US Current Account Adjustment," Center for International and Development Economics Research (CIDER) Working Papers C00-116, University of California at Berkeley.
- Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
- Paul Krugman, 1988.
"Differences In Income Elasticities and Trends in Real Exchange Rates,"
NBER Working Papers
2761, National Bureau of Economic Research, Inc.
- Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
- Menzie David Chinn, 1991. "Beware of econometricians bearing estimates: Policy analysis in a “unit root” world," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 10(4), pages 546-567.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Michael P. Leahy, 1998. "New summary measures of the foreign exchange value of the dollar," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 811-818.
- Charles Engel, 2010.
"Exchange rate policies,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 229-250
Bank for International Settlements.
- Bosworth, Barry & Collins, Susan M., 2010.
"Rebalancing the US Economy in a Postcrisis World,"
ADBI Working Papers
236, Asian Development Bank Institute.
- Kappler, Marcus & Reisen, Helmut & Schularick, Moritz & Turkisch, Edouard, 2011.
"The macroeconomic effects of large exchange rate appreciations,"
2011/3, Free University Berlin, School of Business & Economics.
- Marcus Kappler & Helmut Reisen & Moritz Schularick & Edouard Turkisch, 2013. "The Macroeconomic Effects of Large Exchange Rate Appreciations," Open Economies Review, Springer, vol. 24(3), pages 471-494, July.
- Marcus Kappler & Helmut Reisen & Moritz Schularick & Edouard Turkisch, 2011. "The Macroeconomic Effects of Large Exchange Rate Appreciations," OECD Development Centre Working Papers 296, OECD Publishing.
- Kappler, Marcus & Reisen, Helmut & Schularick, Moritz & Turkisch, Edouard, 2011. "The macroeconomic effects of large exchange rate appreciations," ZEW Discussion Papers 11-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Yoko Oguro, 2007. "The Influence of Intra-Industry Trade on Export Sensitivity to Exchange Rates," Hi-Stat Discussion Paper Series d07-222, Institute of Economic Research, Hitotsubashi University.
- Joseph W. Gruber & Steven B. Kamin, 2005. "Explaining the global pattern of current account imbalances," International Finance Discussion Papers 846, Board of Governors of the Federal Reserve System (U.S.).
- Dong, Wei, 2012.
"The role of expenditure switching in the global imbalance adjustment,"
Journal of International Economics,
Elsevier, vol. 86(2), pages 237-251.
- Wei Dong, 2010. "The Role of Expenditure Switching in the Global Imbalance Adjustment," Working Papers 10-16, Bank of Canada.
- Lim, Sokchea & Khun, Channary, 2010. "U.S. Bilateral Trade Deficits with China and Japan: The Role of Japanese Direct Investment," MPRA Paper 30740, University Library of Munich, Germany.
- Knobel, Alexander, 2011.
"Estimation of import demand function in Russia,"
Publishing House "SINERGIA PRESS", vol. 24(4), pages 3-26.
- Bornali Bhandari, 2013. "Cross-Price Effects and US Trade Elasticities," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 7(3), pages 273-313, August.
- Victor Pontines & Reza Siregar, 2012. "Episodes of Large Exchange Rate Appreciations and Reserves Accumulations in Selected Asian Economies: Is Fear of Appreciation Justified?," CAMA Working Papers 2012-31, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Yoko Oguro & Kyoji Fukao & Yougesh Khatri, 2008. "Trade Sensitivity to Exchange Rates in the Context of Intra-Industry Trade," IMF Working Papers 08/134, International Monetary Fund.
- ANDO Mitsuyo & IRIYAMA Akie, 2009. "International Production Networks and Export/Import Responsiveness to Exchange Rates: The case of Japanese manufacturing firms," Discussion papers 09049, Research Institute of Economy, Trade and Industry (RIETI).
- Nie, Jun & Taylor, Lisa, 2013. "Economic growth in foreign regions and U.S. export growth," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 31-63.
- Joseph Gruber & Steven Kamin, 2009. "Do Differences in Financial Development Explain the Global Pattern of Current Account Imbalances?," Review of International Economics, Wiley Blackwell, vol. 17(4), pages 667-688, 09.
- Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.