Robert M. La Follette School of Public Affairs

Doomed to Deficits? Aggregate U.S. Trade Flows Re-Examined

This paper examines the stability of import and export demand functions for the United States from the first quarter of 1975 to the second quarter of 2001. Analysis readily identifies an export demand function, with a structural break in the import demand function in 1995 that is rectified by excluding computers and parts from the import series. The resulting point estimates confirm the persistence of the income asymmetry. One policy implication of these findings is that dollar depreciation unaccompanied by a realignment of growth trends is insufficient to substantially reduce the U.S. trade deficit.

Additional Info

  • Volume or issue no.: La Follette School Working Paper No. 2005-015
  • Author(s): Menzie D. Chinn