This paper attempts to identify the major economic factors that influence the bilateral trade balance between Japan and the US. Differing from conventional elasticities approach, one more variable—the net foreign assets—is added in the Vector Autoregression estimation using quarterly data from 1980: I to 2006: IV. The Johansen and Juselius result indicates three long-run relationships among five macro variables: trade balance, domestic income, foreign income, net foreign assets and real exchange rate. Short run adjustment parameters are identified as coefficients of the error correction terms. The variance in trade balance due to variations in the two macro variables—the exchange rate and the net foreign assets—is examined by Impulse Response Functions and Variance Decomposition procedures. The main finding of this paper is that taking the valuation effect of the net foreign asset position into account, the final effect of the exchange rate changes on trade balance is undetermined. Although appreciation can reduce trade surplus in the short run, in a longer horizon, there is no stable relationship. The positive sign of the relation is not guaranteed in this case, and appreciation is not surely able to correct the trade imbalance between countries.
|Advisor:||Hoon, Hian Teck|
|School:||Singapore Management University (Singapore)|
|Department:||School of Economics|
|School Location:||Republic of Singapore|
|Source:||MAI 49/04M, Masters Abstracts International|
|Keywords:||Bilateral trade balance, Currency appreciation, Exchange rate, Foreign assets, Trade surplus, Vector autoregression estimation|
Copyright in each Dissertation and Thesis is retained by the author. All Rights Reserved
The supplemental file or files you are about to download were provided to ProQuest by the author as part of a
dissertation or thesis. The supplemental files are provided "AS IS" without warranty. ProQuest is not responsible for the
content, format or impact on the supplemental file(s) on our system. in some cases, the file type may be unknown or
may be a .exe file. We recommend caution as you open such files.
Copyright of the original materials contained in the supplemental file is retained by the author and your access to the
supplemental files is subject to the ProQuest Terms and Conditions of use.
Depending on the size of the file(s) you are downloading, the system may take some time to download them. Please be