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Does World Investment Demand Determine U.S. Exports?

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  • Warner, Andrew M

Abstract

An important but apparently neglected fact about U.S. exports is that export variation over time is dominated by variation in exports of capital goods and industrial supplies rather than consumer goods. This fact suggests that world investment demand rather than world consumption demand may be an important yet neglected determinant of U.S. exports. This paper documents a remarkably robust statistical relationship between U.S. exports and world investment demand, and shows that controlling for world investment changes other aspects of traditional export demand equations. To the extent that world investment behaves differently than world consumption, this finding may lead to a revision of current thinking about the ultimate determinants of U.S. exports and the mechanisms through which world economic shocks are transmitted to the U.S. economy.
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  • Warner, Andrew M, 1994. "Does World Investment Demand Determine U.S. Exports?," American Economic Review, American Economic Association, vol. 84(5), pages 1409-1422, December.
    • Handle: RePEc:aea:aecrev:v:84:y:1994:i:5:p:1409-22
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    Cited by:

    1. Erceg, Christopher J. & Guerrieri, Luca & Gust, Christopher, 2008. "Trade adjustment and the composition of trade," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2622-2650, August.
    2. Engel, Charles & Wang, Jian, 2011. "International trade in durable goods: Understanding volatility, cyclicality, and elasticities," Journal of International Economics, Elsevier, vol. 83(1), pages 37-52, January.
    3. Boileau, Martin, 2002. "Trade in capital goods and investment-specific technical change," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 963-984, June.
    4. Simon Bilo, 2018. "The international business cycle as intertemporal coordination failure," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 31(1), pages 27-49, March.
    5. Andrew M. Warner, 1992. "Import demand and supply with relatively few theoretical or empirical puzzles," International Finance Discussion Papers 433, Board of Governors of the Federal Reserve System (U.S.).
    6. Mr. Gian M Milesi-Ferretti & Mr. Lorenzo Giorgianni, 1997. "Determinants of Korean Trade Flows and their Geographical Destination," IMF Working Papers 1997/054, International Monetary Fund.
    7. Arize, A. C. & Shwiff, Steven S., 1998. "The appropriate exchange-rate variable in the money demand of 25 countries: an empirical investigation," The North American Journal of Economics and Finance, Elsevier, vol. 9(2), pages 169-185, December.
    8. Jiang, Mingming, 2016. "By force of demand: Explaining cyclical fluctuations of international trade and government spending," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 249-267.
    9. Boileau, Martin, 1999. "Trade in capital goods and the volatility of net exports and the terms of trade," Journal of International Economics, Elsevier, vol. 48(2), pages 347-365, August.
    10. Charles Engel & Jian Wang, 2007. "International trade in durable goods: understanding volatility, cyclicality, and elastics," Globalization Institute Working Papers 03, Federal Reserve Bank of Dallas.

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