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Examining Patterns of Bilateral Trade between Australia and Colombia by Using Cointegration Analysis and Error-Correction Models

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Author Info
Cortes, Maria () (Universidad Del Valle)
Abstract

The main objective of this paper is to understand whether there is a long-term relationship between Australia and Colombian imports by using macroeconomic fundamentals such as the real exchange rate, income, population and openness. We use multivariate cointegration techniques and error correction models along with time-series data (1960-2005). We focus on testing for cointegration in the presence of structural breaks. The findings suggest that the value of Australian imports from Colombia is cointegrated with three economic series: income of both participating countries and the Colombian population. The real value of Colombian imports from Australia is cointegrated with the real bilateral exchange rate and total Colombian world imports. The relationship between the value of bilateral imports and the cointegrated series can be seen as long-running bilateral import elasticities. High coefficients of the cointegrated variables indicate that opportunities exist to improve long-term trade relationships between the two countries.

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Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp07-20.

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Length: 28 pages
Date of creation: 2007
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Handle: RePEc:uow:depec1:wp07-20

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
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Web page: http://www.uow.edu.au/commerce/econ/
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Related research
Keywords: trade; gravity model; Latin America; Australia; cross-sectional data.;

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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    Other versions:
  4. Saikkonen, Pentti & L tkepohl, Helmut & Trenkler, Carsten, 2006. "Break Date Estimation For Var Processes With Level Shift With An Application To Cointegration Testing," Econometric Theory, Cambridge University Press, vol. 22(01), pages 15-68, February. [Downloadable!]
  5. Mohsen Bahmani-Oskooee & Taggert J. Brooks, 1999. "Cointegration Approach To Estimating Bilateral Trade Elasticities Between U.S. And Her Trading Partners," International Economic Journal, Korean International Economic Association, vol. 13(4), pages 119-128, December. [Downloadable!] (restricted)
  6. Westerlund, Joakim & Edgerton , David, 2006. "New Improved Tests for Cointegration with Structural Breaks," Working Papers 2006:3, Lund University, Department of Economics.
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  7. Céline CARRERE & Maurice SCHIFF, 2004. "On the Geography of Trade: Distance is Alive and Well," Working Papers 200423, CERDI. [Downloadable!]
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  8. Mohsen Bahmani-Oskooee & Zohre Ardalani, 2006. "Exchange Rate Sensitivity of U.S. Trade Flows: Evidence from Industry Data," Southern Economic Journal, Southern Economic Association, vol. 72(3), pages 542-559, January.
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  11. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
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  12. Cushman, David O., 1987. "U.S. bilateral trade balances and the dollar," Economics Letters, Elsevier, vol. 24(4), pages 363-367. [Downloadable!] (restricted)
  13. Kyereme, Stephen S, 2002. "Determinants of United States' Trade Balance with Australia," Applied Economics, Taylor and Francis Journals, vol. 34(10), pages 1241-50, July. [Downloadable!] (restricted)
  14. Bahmani-Oskooee, Mohsen & Goswami, Gour Gobinda, 2004. "Exchange rate sensitivity of Japan's bilateral trade flows," Japan and the World Economy, Elsevier, vol. 16(1), pages 1-15, January. [Downloadable!] (restricted)
  15. Bahmani-Oskooee, Mohsen & Ratha, Artatrana, 2008. "Exchange rate sensitivity of US bilateral trade flows," Economic Systems, Elsevier, vol. 32(2), pages 129-141, June. [Downloadable!] (restricted)
  16. Mohsen Bahmani-Oskooee, 1998. "COINTEGRATION APPROACH TO ESTIMATE THE LONG-RUN TRADE ELASTICITIES IN LDCs," International Economic Journal, Korean International Economic Association, vol. 12(3), pages 89-96, October. [Downloadable!] (restricted)
  17. Mohsen Bahmani-Oskooee & Claire Economidou & Gour Gobinda Goswami, 2005. "How sensitive are Britain's inpayments and outpayments to the value of the British pound," Journal of Economic Studies, Emerald Group Publishing, vol. 32(5), pages 455-467, October. [Downloadable!] (restricted)
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