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Doomed to Deficits? Aggregate U.S. Trade Flows Re-Examined

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Menzie D. Chinn

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Abstract

This paper examines the stability of import and export demand functions for the United States over the 1975q1-2001q2 period. Using the Johansen maximum likelihood approach, an export demand function is readily identified. In contrast, there appears to be a structural break in the import demand function in 1995; specifications incorporating this break pass tests for cointegration, although the price elasticity is not statistically significant. Only when excluding computers and parts from the import series is a stable import demand function detected. The resulting point estimates do not exhibit the income asymmetry typically found in other studies of aggregate U.S. trade flows.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9521.

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Date of creation: Mar 2003
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Handle: RePEc:nbr:nberwo:9521

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F31 - International Economics - - International Finance - - - Foreign Exchange
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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  3. Paul Krugman, 1989. "Differences In Income Elasticities and Trends in Real Exchange Rates," NBER Working Papers 2761, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. 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.
  5. Rose, Andrew K., 1991. "The role of exchange rates in a popular model of international trade : Does the 'Marshall-Lerner' condition hold?," Journal of International Economics, Elsevier, vol. 30(3-4), pages 301-316, May. [Downloadable!] (restricted)
  6. 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. [Downloadable!]
  7. Boyd, Derick & Caporale, Gugielmo Maria & Smith, Ron, 2001. "Real Exchange Rate Effects on the Balance of Trade: Cointegration and the Marshall-Lerner Condition," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 187-200, July. [Downloadable!] (restricted)
  8. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
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  10. 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.). [Downloadable!]
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  11. 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. [Downloadable!] (restricted)
  12. 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.). [Downloadable!]
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  1. Olivier Blanchard & Francesco Giavazzi & Filipa Sa, 2005. "The U.S. Current Account and the Dollar," NBER Working Papers 11137, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. 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). [Downloadable!]
  3. Anwar Shaikh & Gennaro Zezza & Claudio dos Santos, . "Is International Growth the Way Out of U.S. Current Account Deficits? A Note of Caution," Economics Policy Note Archive 03-6, Levy Economics Institute, The. [Downloadable!]
  4. Panayiotis P. Athanasoglou & Ioanna C. Bardaka, 2008. "Price and Non - Price Competitiveness of Exports of Manufactures," Working Papers 69, Bank of Greece. [Downloadable!]
  5. Claudio H. Dos Santos & Anwar M. Shaikh & Gennaro Zezza, 2003. "Measures of the Real GDP of U.S. Trading Partners: Methodology and Results," International Trade 0309021, EconWPA. [Downloadable!]
    Other versions:
  6. Mizanur RAHMAN & Willem THORBECKE, 2007. "How Would China's Exports be Affected by a Unilateral Appreciation of the RMB and a Joint Appreciation of Countries Supplying Intermediate Imports?," Discussion papers 07012, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  7. 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. [Downloadable!]
  8. Yin-Wong Cheung, 2003. "An Analysis of Hong Kong Export Performance," Santa Cruz Department of Economics, Working Paper Series 1037, Department of Economics, UC Santa Cruz. [Downloadable!]
    Other versions:
  9. Margarita Katsimi & Thomas Moutos, 2006. "Inequality and the US Import Demand Function," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  10. Adam, Antonis / Katsimi, Margarita / Moutos, Thomas, 2008. "Inequality and the Import Demand Function," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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