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Are Major US Trading Partners’ Exports and Imports Cointegrated? Evidence from Bootstrap ARDL

Author

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  • Soo Khoon Goh

    (Soo Khoon Goh (corresponding author) and Chung Yan Sam are at the Centre for Policy Research & International Studies, Universiti Sains Malaysia, Malaysia.)

  • Tuck Cheong Tang

    (Tuck Cheong Tang is at the Faculty of Economics & Administration, University of Malaya, Malaysia.)

  • Chung Yan Sam

    (Chung Yan Sam are at the Centre for Policy Research & International Studies, Universiti Sains Malaysia, Malaysia.)

Abstract

A study by McNown, Sam, and Goh [2018, Applied Economics, 50(13), 1509–1521] has shown that the autoregressive distributed lag (ARDL) bounds test proposed by Pesaran, Shin, and Smith [2001, Journal of Applied Econometrics, 16(3), 289–326] may draw incorrect conclusions on the status of the cointegration test, if the ARDL bounds test is not implemented correctly. We assess the long-run relationship between US exports and imports as well as between its eight major trading partners (Brazil, Canada, China, France, Germany, Japan, Mexico, and the United Kingdom) by applying the newly developed bootstrap ARDL test by McNown et al. (2018). The results show cointegration if exports are used as the dependent variable, but not when imports are being considered as the dependent variable. This suggests that the cointegration result is sensitive to the choice of the dependent variable. We have similar findings when we examine the US and its major trading partners. No long-run relationship exists between exports and imports in the case of the US, which concurs with the finding of Fountas and Wu [1999, International Economic Journal, 13(3), 51–58]. The results also suggest that the US attempts to reduce its bilateral imbalances through targeted trade policies may not be appropriate. JEL Classification: F14, C22

Suggested Citation

  • Soo Khoon Goh & Tuck Cheong Tang & Chung Yan Sam, 2020. "Are Major US Trading Partners’ Exports and Imports Cointegrated? Evidence from Bootstrap ARDL," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(1), pages 7-27, February.
    • Handle: RePEc:sae:mareco:v:14:y:2020:i:1:p:7-27
    DOI: 10.1177/0973801019886481
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    References listed on IDEAS

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    More about this item

    Keywords

    Bootstrap ARDL; Cointegration; Degenerate Cases; Exports; Imports;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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