What Determines a Nation’s Exports and Imports?: An Empirical Evidence of Major Industrial Countries
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This paper tries to evaluate the relative importance of price changes to income changes in a nation’s trade by examining the relative sizes of price and income elasticities of exports and imports of major industrial countries. After applying linear regression estimation (autoregressive distributed lagged model), the paper finds three distinctive features of the trade of industrial countries. First, relative price changes have little effect on trade. Secondly, income changes have a dominant effect on trade over price changes. The policy implication of the estimation results is that currency depreciation cannot be an effective measure to improve trade performance of those countries. The improvement in a country’s non-price competition may be the only solution to better trade performance. Thirdly, there is an intrinsic tendency of both a persistent trade imbalance among industrial countries and deflationary adjustment to trade imbalance, which in turn exerts a heavy downward pressure on economic growth of the whole industrial world. The tendency of both trade imbalance and consequent deflationary pressure of economic growth may put forward one of most challenging tasks that the industrial world has to get through together with overcoming the current crisis of the world economy.
Abstract
This paper tries to evaluate the relative importance of price changes to income changes in a nation’s trade by examining the relative sizes of price and income elasticities of exports and imports of major industrial countries. After applying linear regression estimation (autoregressive distributed lagged model), the paper finds three distinctive features of the trade of industrial countries. First, relative price changes have little effect on trade. Secondly, income changes have a dominant effect on trade over price changes. The policy implication of the estimation results is that currency depreciation cannot be an effective measure to improve trade performance of those countries. The improvement in a country’s non-price competition may be the only solution to better trade performance. Thirdly, there is an intrinsic tendency of both a persistent trade imbalance among industrial countries and deflationary adjustment to trade imbalance, which in turn exerts a heavy downward pressure on economic growth of the whole industrial world. The tendency of both trade imbalance and consequent deflationary pressure of economic growth may put forward one of most challenging tasks that the industrial world has to get through together with overcoming the current crisis of the world economy.
참고문헌 (21)
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