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External Adjustments and Exchange Rate Flexibility: Some Evidence from U.S. Data

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  • Kim, Yoonbai

Abstract

This paper examines the role of the exchange rate in U.S. external adjustments. The results show that the exchange rate is an important transmission channel of influence on prices, and with longer lags, on income and the trade balance. The effects of the exchange rate and relative prices on the trade balance are not symmetric even in the long run. Exchange rate feedback is insignificant and makes little difference in trade balance adjustment. There are also indications that the response of relative prices to the exchange rate shifted in recent years. Such changes seem to help explain the persistence of the U.S. trade deficit in recent years for multilateral trade, but not bilateral trade, with Japan or Germany. Copyright 1991 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 73 (1991)
Issue (Month): 1 (February)
Pages: 176-81

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Handle: RePEc:tpr:restat:v:73:y:1991:i:1:p:176-81

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Web page: http://mitpress.mit.edu/journals/

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Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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Cited by:
  1. Schröder, Michael & Hüfner, Felix P., 2002. "Exchange rate pass-through to consumer prices: a European perspective," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 02-20, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Peter Rowland, . "Exchange Rate Pass-Throught to Domestic Prices: The Case of Colombia," Borradores de Economia, Banco de la Republica de Colombia 254, Banco de la Republica de Colombia.
  3. Bornali Bhandari, 2013. "Cross-Price Effects and US Trade Elasticities," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, National Council of Applied Economic Research, vol. 7(3), pages 273-313, August.
  4. I. Agur, 2003. "Trade-volume hysteresis: an investigation using aggregate data," WO Research Memoranda (discontinued), Netherlands Central Bank, Research Department 740, Netherlands Central Bank, Research Department.
  5. Peter Rowland, 2004. "Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, BANCO DE LA REPÚBLICA - ESPE.
  6. Aliyu, Shehu Usman Rano & Yakub, Ma'aji Umar & Sanni, Ganiyu Kayode & Duke, Omolara, 2009. "Exchange Rate Pass-through in Nigeria: Evidence from a Vector Error Correction Model," MPRA Paper 25053, University Library of Munich, Germany, revised 29 Mar 2010.
  7. Peter Rowland, 2003. "Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia," BORRADORES DE ECONOMIA, BANCO DE LA REPÚBLICA 002683, BANCO DE LA REPÚBLICA.

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