Trade, Production-Sharing and the Exchange Rate: A Decade of U.S.-Mexican Integration
AbstractThis paper examines the effect of cross-border production sharing on the sensitivity of trade to the exchange rate and to other key variables. Theoretically, the response of a country's exports to the exchange rate should decline as the share of exported components for use in the manufacture of its imports rises. Similarly, the response of its imports of end products should decline as the share of its exported components in those imports rises. The response of a country's imports to domestic GDP should decline and the response to the exporting country's GDP should rise as the share of imported components for use in the manufacture of exports rises. These propositions are tested for trade between the U.S. and Mexico, using OLS and VEC techniques and allowing for the impact of NAFTA. The findings broadly confirm the aforementioned priors. In addition to their implications for trade-balance adjustment, these results have potentially important implications for the choice of exchange-rate regime.
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.
Bibliographic InfoPaper provided by Lowe Institute of Political Economy in its series Working Papers with number 0502.
Length: 35 pages Creation Date: 2003-12 Revision Date: 2005-02
Date of creation:
Date of revision:
Contact details of provider:
Postal: 850 Columbia Avenue, Claremont, CA 91711-6420
Web page: http://lowe.claremontmckenna.edu/
More information through EDIRC
trade balance; fragmentation; intra-industry trade; exchange rates; NAFTA.;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F15 - International Economics - - Trade - - - Economic Integration
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-20 (All new papers)
- NEP-HIS-2005-12-20 (Business, Economic & Financial History)
- NEP-IFN-2005-12-20 (International Finance)
- NEP-INT-2005-12-20 (International Trade)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alex Huemer) The email address of this maintainer does not seem to be valid anymore. Please ask Alex Huemer to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.