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Japan's Persistent Trade Surplus: Policies for Adjustment

  • Byron Gangnes

    ()

    (Department of Economics, University of Hawaii at Manoa)

  • F. Gerard Adams

While part of the recent increase in the Japanese trade surplus can be attributed to the Japanese recession, the surplus has widened despite the appreciation of the yen and enactment of policies to open Japanese markets. We review the trade surplus issue in the light of theories of trade and current account adjustment. We evaluate the potential for exchange appreciation and Japanese fiscal policy to reduce the imbalance, estimating their effects using simulations of the NIRA-LINK model of the US-Japan-world economy. The simulations show that moderate use of macropolicies would not be sufficient to eliminate the trade imbalance.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/88-98/WP_94-4.pdf
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 199404.

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Length: 25 pages
Date of creation: 1994
Date of revision:
Handle: RePEc:hai:wpaper:199404
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  1. Rose, Andrew K., 1991. "The role of exchange rates in a popular model of international trade : Does the 'Marshall-Lerner' condition hold?," Journal of International Economics, Elsevier, vol. 30(3-4), pages 301-316, May.
  2. Assaf Razin, 1993. "The Dynamic-Optimizing Approach to the Current Account: Theory and Evidence," NBER Working Papers 4334, National Bureau of Economic Research, Inc.
  3. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
  4. Kouri, Pentti J K, 1976. " The Exchange Rate and the Balance of Payments in the Short Run and in the Long Run: A Monetary Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 280-304.
  5. Baldwin, Richard, 1988. "Hyteresis in Import Prices: The Beachhead Effect," American Economic Review, American Economic Association, vol. 78(4), pages 773-85, September.
  6. Swoboda, Alexander K, 1976. " Comment on P. J. K. Kouri, "The Exchange Rate and the Balance of Payments in the Short Run and in the Long Run: A Monetary Approach."," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 305-08.
  7. Dixit, Avinash K, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 205-28, May.
  8. C. Fred Bergsten & Marcus Noland, 1993. "Reconcilable Differences? United States-Japan Economic Conflict," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 34, December.
  9. Robert Corker, 1989. "External Adjustment and the Strong Yen: Recent Japanese Experience," IMF Staff Papers, Palgrave Macmillan, vol. 36(2), pages 464-493, June.
  10. Marcus Noland & Bela Balassa, 1988. "Japan in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 0412, December.
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