Working Paper: NBER ID: w9521
Authors: Menzie D. Chinn
Abstract: This paper examines the stability of import and export demand functions for the United States over the 1975q1-2001q2 period. Using the Johansen maximum likelihood approach, an export demand function is readily identified. In contrast, there appears to be a structural break in the import demand function in 1995; specifications incorporating this break pass tests for cointegration, although the price elasticity is not statistically significant. Only when excluding computers and parts from the import series is a stable import demand function detected. The resulting point estimates do not exhibit the income asymmetry typically found in other studies of aggregate U.S. trade flows.
Keywords: US trade flows; import demand; export demand; real exchange rates; income elasticity
JEL Codes: F31; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| total exports of goods and services (F10) | US income (D31) |
| total exports of goods and services (F10) | real exchange rate (F31) |
| unit labor cost deflated measure of the dollar (J39) | trade flows (F10) |
| US income (D31) | imports (F14) |
| non-computer imports (F19) | income elasticity asymmetry (D11) |