International Trade Imbalance: A Comparison of the U.S. and the U.K

This paper investigates macroeconomic determinants of the trade imbalance in the U.S. and the U.K. It is based on a simple DSGE model under perfect capital mobility and flexible exchange rates assumptions of the Mundell-Fleming international trade model. Results suggest both lagged by one period mon...

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Bibliographic Details
Published in:Global business and finance review 2015, 20(2), , pp.1-14
Main Authors: Chen, David, Li, Tongzhe
Format: Article
Language:English
Subjects:
Budget deficits
International trade
경영학
Online Access:Get full text
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Summary:This paper investigates macroeconomic determinants of the trade imbalance in the U.S. and the U.K. It is based on a simple DSGE model under perfect capital mobility and flexible exchange rates assumptions of the Mundell-Fleming international trade model. Results suggest both lagged by one period money component and lagged by one period first-order differenced government budget deficit were destabilizers for contemporaneous first-order differenced current account deficit in both countries for 1990-2012. The effect of government budget deficit was weaker. Lagged by one period first-order differenced personal consumption expenditure became a medium level destabilizer for U.S. and an insignificant stabilizer for U.K. for the same current account deficit variable. The Judd-Gaspar test suggests that this model is robust in accuracy for both nations.
ISSN:1088-6931
2384-1648
DOI:10.17549/gbfr.2015.20.2.1