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External Adjustments and Exchange Rate Flexibility: Some Evidence from U.S. Data

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  • Kim, Yoonbai

Abstract

This paper examines the role of the exchange rate in U.S. external adjustments. The results show that the exchange rate is an important transmission channel of influence on prices, and with longer lags, on income and the trade balance. The effects of the exchange rate and relative prices on the trade balance are not symmetric even in the long run. Exchange rate feedback is insignificant and makes little difference in trade balance adjustment. There are also indications that the response of relative prices to the exchange rate shifted in recent years. Such changes seem to help explain the persistence of the U.S. trade deficit in recent years for multilateral trade, but not bilateral trade, with Japan or Germany. Copyright 1991 by MIT Press.

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  • Kim, Yoonbai, 1991. "External Adjustments and Exchange Rate Flexibility: Some Evidence from U.S. Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 176-181, February.
  • Handle: RePEc:tpr:restat:v:73:y:1991:i:1:p:176-81
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    Cited by:

    1. Peter Rowland, 2004. "Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 22(47), pages 106-125, December.
    2. repec:kap:iecepo:v:14:y:2017:i:4:d:10.1007_s10368-016-0341-7 is not listed on IDEAS
    3. Aliyu, Shehu Usman Rano & Yakub, Ma'aji Umar & Sanni, Ganiyu Kayode & Duke, Omolara, 2009. "Exchange Rate Pass-through in Nigeria: Evidence from a Vector Error Correction Model," MPRA Paper 25053, University Library of Munich, Germany, revised 29 Mar 2010.
    4. Bornali Bhandari, 2013. "Cross-Price Effects and US Trade Elasticities," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 7(3), pages 273-313, August.
    5. Peter Rowland, 2003. "Exchange Rate Pass-Throught to Domestic Prices: The Case of Colombia," Borradores de Economia 254, Banco de la Republica de Colombia.
    6. Felix P. Hüfner & Michael Schröder, 2003. "Exchange Rate Pass-Through to Consumer Prices: A European Perspective," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 58(03), pages 383-412, September.
    7. I. Agur, 2003. "Trade-volume hysteresis: an investigation using aggregate data," WO Research Memoranda (discontinued) 740, Netherlands Central Bank, Research Department.
    8. Peter Rowland, 2003. "Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia," BORRADORES DE ECONOMIA 002683, BANCO DE LA REPÚBLICA.

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