Imports – Exports Correlation: A New Enigma?
This paper shows that a puzzling yet strong correlation exists between imports and exports. Cross-section and time-series analysis for the broadest possible country sample (159 countries over 1960-2006) attests to the robustness of this finding, even though causality is not explored in depth. After ruling out common factors driving simultaneously imports and exports, as well as systematic government interventions, we favor two weighty explanations. The first one is the presence of international financial constraints, in the spirit of the Feldstein-Horioka literature. However, we contend that this is an incomplete rationale, and thus we put forward a classic argument relating exports, imports, and economic growth in the short and the long-run. In the short run, a simple Mundell-Fleming logic can be invoked, whilst a longer-run perspective can be rooted in export-led growth models. Our results open room to rich and provocative policy implications as well as to the reinterpretation of commonly accepted notions in the analysis of open economies. The main policy outcome is that active, merchantilist strategies are in practice ineffectual to bring countries into large and persistent trade surpluses. In this light, trade, fiscal and exchange rate policies are deemed to be of little impact, letting alone their distortive side effects, in the medium and long term. At most they can aim to correct short-term imbalances. As a result, export-oriented policies should not be primarily judged in terms of growing trade balances but in terms of the indisputable benefits of increased export volumes. Imports, as an endogenous variable, would simply accompany exports. In the research arena, the paper’s results suggest that academic work should place some effort in reaching a better articulation between international trade, international finance, and saving and investment theory and empirics. These all are normally treated as separate fields, when in truth they are closely connected by the elemental fact that the trade balance is part of the current account balance, and the latter is by definition equal to saving minus investment. To a great extent, this is a consequence of the intellectual wall in macroeconomics between the Mundell-Fleming and the intertemporal approach to the balance of payments.
Volume (Year): 1 (2008)
Issue (Month): 52 (October - December)
|Contact details of provider:|| Postal: Reconquista 266 - C1003ABF - Buenos Aires|
Phone: (54-11) 4348-3582
Fax: (54-11) 4348-3794
Web page: http://www.bcra.gov.ar
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dierk Herzer & Felicitas Nowak-Lehmann D., 2005. "Are exports and imports of Chile cointegrated?," Ibero America Institute for Econ. Research (IAI) Discussion Papers 111, Ibero-America Institute for Economic Research.
- Ricardo Bebczuk & Klaus Schmidt-Hebbel, 2010.
"Revisiting the Feldstein-Horioka Puzzle: An institutional sector view,"
Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 69-104, January-D.
- Bebczuk, Ricardo & Schmidt-Hebbel, Klaus, 2006. "Revisiting the Feldstein-Horioka Puzzle: An Institutional Sector View," MPRA Paper 1802, University Library of Munich, Germany.
- Arize, Augustine C., 2002. "Imports and exports in 50 countries: Tests of cointegration and structural breaks," International Review of Economics & Finance, Elsevier, vol. 11(1), pages 101-115, April.
- Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
- Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
- Penélope López & A. Thirlwall, 2006. "Trade liberalization, the income elasticity of demand for imports, and growth in Latin America," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(1), pages 41-61.
- Iwamoto, Yasushi & van Wincoop, Eric, 2000. "Do Borders Matter? Evidence from Japanese Regional Net Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 241-269, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:bcr:ensayo:v:1:y:2008:i:52:p:39-56. See general 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: (Federico Grillo)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.