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Imports-Exports Correlation: A New Puzzle?

  • Ricardo Bebczuk

    (Central Bank of Argentina)

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 at most an incomplete rationale, and thus put forward a classic (but often neglected) argument relating exports, imports, and economic growth in the short and the long-run. 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.

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Paper provided by Central Bank of Argentina, Economic Research Department in its series BCRA Working Paper Series with number 200833.

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Length: 20 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:bcr:wpaper:200833
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  1. Bebczuk, Ricardo & Schmidt-Hebbel, Klaus, 2006. "Revisiting the Feldstein-Horioka Puzzle: An Institutional Sector View," MPRA Paper 1802, University Library of Munich, Germany.
  2. Lopez, Ramon & Thomas, Vinod, 1988. "Imports and growth in Africa," Policy Research Working Paper Series 20, The World Bank.
  3. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  4. 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.
  5. Penélope Pacheco López & A. P. Thirlwall, 2006. "Trade liberalization, the income elasticity of demand for imports, and growth in Latin America," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 29(1), pages 41-61, October.
  6. 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.
  7. 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 241-69, February.
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