International Trade and Macroeconomic Dynamics: The Case of U.S. Bilateral Trade with G-7 Countries

Posted: 23 Feb 2016

See all articles by Jason M. Walter

Jason M. Walter

University of Wisconsin - Stout

Jungho Baek

University of Alaska Fairbanks - School of Management (SOM)

Won W. Koo

North Dakota State University

Date Written: December 1, 2012

Abstract

The short- and long-run effects of exchange rates, income, interest rates and government spending on U.S. bilateral trade with the other G-7 countries are investigated using an autoregressive distributed lag (ARDL) model. The primary contribution of this study is to consider separating the analysis of exports and imports in an integrated model that empirically encompasses four major schools of thoughts – elasticity, Keynesian income, absorption and monetary approaches – in order to identify macroeconomic linkages to U.S. bilateral trade with the other G-7 countries accurately. Results suggest that, in both the short- and long-run, U.S. imports and exports are highly sensitive to changes in U.S. and foreign income, while U.S. imports and exports are relatively insensitive to changes in bilateral exchange rate. It is also found that both exports and imports are more responsive to changes in government spending than changes in interest rates in both the short- and long-run.

Keywords: ARDL; Japan; Trade; U.S.

Suggested Citation

Walter, Jason M. and Baek, Jungho and Koo, Won W., International Trade and Macroeconomic Dynamics: The Case of U.S. Bilateral Trade with G-7 Countries (December 1, 2012). Research In Economics, Vol. 66, No. 4, 2012. Available at SSRN: https://ssrn.com/abstract=2735725

Jason M. Walter

University of Wisconsin - Stout ( email )

Menomonie , WI 54751
United States

Jungho Baek (Contact Author)

University of Alaska Fairbanks - School of Management (SOM) ( email )

P.O. Box 756080
Fairbanks, AK 99775-0500
United States

Won W. Koo

North Dakota State University ( email )

Morrill 209B
Fargo, ND 58105
United States
701-231-7448 (Phone)
701-231-7400 (Fax)

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