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The Endogeneity of Transpacific Trade Imbalances

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Author Info
Freitag, Stephan

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Abstract

The growing trade imbalances between the United States and East Asia have triggered controversial debates on the global imbalances since the new millenium. Previous contributions have explained the trade imbalances as uni-directional causalities running either from East Asia to the United States or vice versa. This paper proposes reverse causality and mutual interest rather than uni-directional exogeneity as explanations for the transpacific trade imbalances. Applying panel GMM estimators this study finds econometric evidence for an endogeneity of the transpacific trade imbalances. The specific roles of ten East Asian countries within the transpacific imbalance dynamics are identified by asymmetric interaction terms. The estimations reveal a significant impact of U.S. macro policies and East Asian interventions in the foreign exchange markets on the transpacific trade imbalances.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16356.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:16356

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Related research
Keywords: Transpacific Trade Imbalances; Macro Policies; Dynamic Panel Estimations;

Find related papers by JEL classification:
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data

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