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PRINCETON STUDIES IN INTERNATIONAL ECONOMICS
No. 87, August 2000
TRADE ELASTICITIESFOR THE G-7 COUNTRIES
PETER HOOPER
KAREN JOHNSON
AND
JAIME MARQUEZ
INTERNATIONAL ECONOMICS SECTION
DEPARTMENT OF ECONOMICSPRINCETON UNIVERSITY
PRINCETON, NEW JERSEY
PRINCETON STUDIESIN INTERNATIONAL ECONOMICS
PRINCETON STUDIES IN INTERNATIONAL ECONOMICS arepublished by the International Economics Section of theDepartment of Economics of Princeton University. Al-though the Section sponsors the Studies, the authors arefree to develop their topics as they wish. The Sectionwelcomes the submission of manuscripts for publicationin this and its other series. Please see the Notice toContributors at the back of this Study.
The authors of this Study are Peter Hooper, KarenJohnson, and Jaime Marquez. Peter Hooper is Chief U.S.Economist and Co-Head of Global Economic Research atDeutsche Bank Securities. He previously served as DeputyDirector of the Division of International Finance at theFederal Reserve Board and as Associate Economist for theFederal Open Market Committee. He has published widelyin the fields of empirical international economics andpolicy analysis. This is his second publication with theInternational Economics Section.
Karen Johnson is Director of the Division of Inter-national Finance at the Federal Reserve Board and Econ-omist for the Federal Open Market Committee.
Jaime Marquez is a Senior Economist in the Division ofInternational Finance at the Fedearl Reserve Board. Hispublications focus on the estimation of the responsivenessof international trade to changes in economic activity andrelative prices.
GENE M. GROSSMAN, DirectorInternational Economics Section
PRINCETON STUDIES IN INTERNATIONAL ECONOMICS
No. 87, August 2000
TRADE ELASTICITIESFOR THE G-7 COUNTRIES
PETER HOOPER
KAREN JOHNSON
AND
JAIME MARQUEZ
INTERNATIONAL ECONOMICS SECTION
DEPARTMENT OF ECONOMICSPRINCETON UNIVERSITY
PRINCETON, NEW JERSEY
INTERNATIONAL ECONOMICS SECTIONEDITORIAL STAFF
Gene M. Grossman DirectorPierre-Olivier Gourinchas Assistant Director
Margaret B. Riccardi, EditorSharon B. Ernst, Editorial Aide
Lalitha H. Chandra, Subscriptions and Orders
Library of Congress Cataloging-in-Publication Data
Hooper, Peter.Trade elasticities for the G-7 countries / Peter Hooper, Karen Johnson, and Jaime
Marquez.p. cm. — (Princeton studies in international economics ; no. 87)Includes bibliographical references.ISBN 0-88165-259-81. International trade—Econometric models. 2. Elasticity (Economics). 3. Balance of
payments—United States. I. Johnson, Karen. II. Marquez, Jaime R. III. Title. IV.Series.HF1379.H666 2000 00-063451382—dc21 CIP
Copyright © 2000 by International Economics Section, Department of Economics,Princeton University.
All rights reserved. Except for brief quotations embodied in critical articles and reviews,no part of this publication may be reproduced in any form or by any means, includingphotocopy, without written permission from the publisher.
Printed in the United States of America by Princeton University Printing Services atPrinceton, New Jersey
International Standard Serial Number: 0081-8070International Standard Book Number: 0-88165-259-8Library of Congress Catalog Card Number: 00-063451
International Economics Section Tel: 609-258-4048Department of Economics, Fisher Hall Fax: 609-258-1374Princeton University E-mail: [email protected], New Jersey 08544-1021 Url: www.princeton.edu/~ies
CONTENTS
1 INTRODUCTION 1
2 ECONOMETRIC FORMULATIONS 3Long-Run Formulation 3Short-Run Formulation 4Parameter Constancy 5
3 ECONOMETRIC RESULTS 7Long-Run Elasticities 7Short-Run Elasticities 9Parameter Constancy 10
4 IMPLICATIONS FOR EXCHANGE RATES 12
5 CONCLUSIONS 13
APPENDIX A: DATA 14
APPENDIX B: LONG-RUN ELASTICITIES 19Exports 19Imports 19
APPENDIX C: SHORT-RUN ELASTICITIES 38Exports 38Imports 46
REFERENCES 55
TABLES
1 Long-Run Elasticities 8
2 Short-Run Elasticities 9
3 Frequency of Violations of Parameter Stability 10
4 Violations of Parameter Stability, 1995–1996 11
5 Growth, Elasticities, and Real Exchange Rates 12
A–1 Bilateral Export Shares 14
A–2 Augmented Dickey-Fuller Test Results 15
B–1 Exports: Sensitivity to Lag Length 20
B–2 Imports: Sensitivity to Lag Length 22
C–1 Exports: Parameter Estimates from the Error-CorrectionModel 38
C–2 Imports: Parameter Estimates from the Error-CorrectionModel 47
FIGURES
A–1 Canada: Trade, Income, and Prices 15
A–2 France: Trade, Income, and Prices 16
A–3 Germany: Trade, Income, and Prices 16
A–4 Italy: Trade, Income, and Prices 17
A–5 Japan: Trade, Income, and Prices 17
A–6 United Kingdom: Trade, Income, and Prices 18
A–7 United States: Trade, Income, and Prices 18
B–1 Exports for Canada: Chow Tests for the CointegrationModel 23
B–2 Exports for France: Chow Tests for the CointegrationModel 24
B–3 Exports for Germany: Chow Tests for the CointegrationModel 24
B–4 Exports for Italy: Chow Tests for the CointegrationModel 25
B–5 Exports for Japan: Chow Tests for the CointegrationModel 25
B–6 Exports for the United Kingdom: Chow Tests forthe Cointegration Model 26
B–7 Exports for United States: Chow Tests for the Coin-tegration Model 26
B–8 Exports for Canada: Predictive Accuracy of the Coin-tegration Model 27
B–9 Exports for France: Predictive Accuracy of the Coin-tegration Model 27
B–10 Exports for Germany: Predictive Accuracy of the Coin-tegration Model 28
B–11 Exports for Italy: Predictive Accuracy of the Cointe-gration Model 28
B–12 Exports for Japan: Predictive Accuracy of the Cointe-gration Model 29
B–13 Exports for the United Kingdom: Predictive Accuracyof the Cointegration Model 29
B–14 Exports for the United States: Predictive Accuracyof the Cointegration Model 30
B–15 Imports for Canada: Chow Tests for the CointegrationModel 30
B–16 Imports for France: Chow Tests for the CointegrationModel 31
B–17 Imports for Germany: Chow Tests for the CointegrationModel 31
B–18 Imports for Italy: Chow Tests for the CointegrationModel 32
B–19 Imports for Japan: Chow Tests for the CointegrationModel 32
B–20 Imports for the United Kingdom: Chow Tests for theCointegration Model 33
B–21 Imports for the United States: Chow Tests for theCointegration Model 33
B–22 Imports for Canada: Predictive Accuracy of theCointegration Model 34
B–23 Imports for France: Predictive Accuracy of the Coin-tegration Model 34
B–24 Imports for Germany: Predictive Accuracy of the Coin-tegration Model 35
B–25 Imports for Italy: Predictive Accuracy of the Cointe-gration Model 35
B–26 Imports for Japan: Predictive Accuracy of the Cointe-gration Model 36
B–27 Imports for the United Kingdom: Predictive Accuracyof the Cointegration Model 36
B–28 Imports for the United States: Predictive Accuracy ofthe Cointegration Model 37
C–1 Exports for Canada: Chow Tests for the ECM Coefficients 39
C–2 Exports for France: Chow Tests for the ECM Coefficients 40
C–3 Exports for Germany: Chow Tests for the ECM Coefficients 40
C–4 Exports for Italy: Chow Tests for the ECM Coefficients 41
C–5 Exports for Japan: Chow Tests for the ECM Coefficients 41
C–6 Exports for the United Kingdom: Chow Tests for the ECMCoefficients 42
C–7 Exports for the United States: Chow Tests for the ECMCoefficients 42
C–8 Exports for Canada: Predictive Accuracy of the Error-Correction Model 43
C–9 Exports for France: Predictive Accuracy of the Error-Correction Model 43
C–10 Exports for Germany: Predictive Accuracy of the Error-Correction Model 44
C–11 Exports for Italy: Predictive Accuracy of the Error-Correction Model 44
C–12 Exports for Japan: Predictive Accuracy of the Error-Correction Model 45
C–13 Exports for the United Kingdom: Predictive Accuracyof the Error-Correction Model 45
C–14 Exports for the United States: Predictive Accuracy ofthe Error-Correction Model 46
C–15 Imports for Canada: Chow Tests for the ECM Coefficients 48
C–16 Imports for France: Chow Tests for the ECM Coefficients 48
C–17 Imports for Germany: Chow Tests for the ECM Coefficients 49
C–18 Imports for Italy: Chow Tests for the ECM Coefficients 49
C–19 Imports for Japan: Chow Tests for the ECM Coefficients 50
C–20 Imports for the United Kingdom: Chow Tests for the ECMCoefficients 50
C–21 Imports for the United States: Chow Tests for the ECMCoefficients 51
C–22 Imports for Canada: Predictive Accuracy of the Error-Correction Model 51
C–23 Imports for France: Predictive Accuracy of the Error-Correction Model 52
C–24 Imports for Germany: Predictive Accuracy of the Error-Correction Model 52
C–25 Imports for Italy: Predictive Accuracy of the Error-Correction Model 53
C–26 Imports for Japan: Predictive Accuracy of the Error-Correction Model 53
C–27 Imports for the United Kingdom: Predictive Accuracy ofthe Error-Correction Model 54
C–28 Imports for the United States: Predictive Accuracy of theError-Correction Model 54
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Xqlwhg Nlqjgrp 414- 413- 0315- 0313
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Xvlqj dyhudjh dqqxdo jurzwk udwhv iru 4<:9 wkurxjk 4<<9 dqg wkh hodv0wlflw| hvwlpdwhv iurp Wdeoh 4/ zh �qg wkdw wkh udwhv ri ghsuhfldwlrq wkdwr�vhw wuhqg0lqfrph h�hfwv duh frpsdudeoh wr wkh LPI*v udwh ri uhdo gh0suhfldwlrq +Wdeoh 8,> wkh h{fhswlrqv duh wkh udwhv iru Lwdo| dqg wkh XqlwhgNlqjgrp15 Lq dgglwlrq/ gl�huhqfhv lq wudgh hodvwlflwlhv pd| fdxvh gl�huhqwudwhv ri ghsuhfldwlrq lq frxqwulhv wkdw kdyh frpsdudeoh jurzwk ri grphvwlfdqg iruhljq pdunhwv1 Iru h{dpsoh/ jurzwk udwhv iru grphvwlf dqg iruhljqJGSv duh vlplodu iru Fdqdgd/ Jhupdq|/ dqg Lwdo|/ exw wkh uhdo0h{fkdqjh0udwh sdwkv qhhghg wr r�vhw wuhqg0lqfrph lq xhqfhv gl�hu= iru Fdqdgd/ wkhsdwk lv ghsuhfldwlrq> iru Lwdo| dqg Jhupdq|/ wkh sdwk lv dssuhfldwlrq1 Il0qdoo|/ wkh udwh ri uhdo ghsuhfldwlrq ri wkh X1V1 groodu wkdw r�vhwv lqfrphh�hfwv lv 51; shufhqw shu |hdu/ zkhuhdv wkh dfwxdo udwh ri ghsuhfldwlrq kdvehhq voljkwo| deryh 4 shufhqw shu |hdu1 Wkxv/ xqohvv wkhuh duh vkliwv lq wkhhodvwlflwlhv dqg lq wkh wuhqg jurzwk udwhv/ ru xqohvv wkh udwh ri uhdo ghsuh0fldwlrq ri wkh groodu dffhohudwhv/ wkh X1V1 h{whuqdo lpedodqfh zloo zlghq1
WDEOH 8
Jurzwk/ Hodvwlflwlhv/ dqg Uhdo H{fkdqjh Udwhv
Dqqxdo Jurzwk +(, Dqqxdo Uhdo Ghsuhfldwlrq +(,
Grphvwlf Iruhljq Uhtxluhg Dfwxdo
+�|, +�i|, +eu, +LPI,
Fdqdgd 519 51: 31; 418
Iudqfh 514 517 319 319
Jhupdq| 51: 517 0415 041<
Lwdo| 516 518 0519 31:
Mdsdq 616 61: 061: 0516
Xqlwhg Nlqjgrp 41< 518 415 0319
Xqlwhg Vwdwhv 519 614 51; 414
Vrxufhv= Dsshqgl{ D/ Wdeoh D04/ dqg LPI/ Lqwhuqdwlrqdo Ilqdqfldo Vwdwlvwlfv1
4Wklv htxdwlrq lv ghulyhg e| Nuxjpdq +4<;</ ht1 :,1 Wkh plqxv vljq lq iurqw riwkh eudfnhwv ri wkh qxphudwru/ krzhyhu/ lv qrw lq Nuxjpdq*v htxdwlrq/ zklfk kdv dw|srjudsklfdo huuru1
5Xvlqj wkh LPI*v gdwd/ lqvwhdg ri rxuv/ vhuyhv dv dq lqghshqghqw fkhfn rq rxu uhvxowv1
45
8 FRQFOXVLRQV
Rxu dqdo|vlv vxjjhvwv wkuhh pdlq frqfoxvlrqv1 Iluvw/ zh �qg wkdw frqyhq0wlrqdo wudgh hodvwlflwlhv duh vwdeoh hqrxjk/ lq prvw fdvhv/ wr khos wudqvodwhhfrqrplf dqdo|vlv lqwr srolf| uhfrpphqgdwlrqv1 Hodvwlflwlhv iru Jhupdqwudgh/ dv zhoo dv iru Lwdoldq dqg Iuhqfk h{sruwv/ duh dq h{fhswlrq/ uh hfw0lqj/ lq doo olnholkrrg/ wkh h�hfwv ri wkh Jhupdq uhxql�fdwlrq1 Vhfrqg/ rxuhodvwlflw| hvwlpdwhv vxjjhvw wkdw wkh sulfh fkdqqho lv zhdn/ li qrw zkroo|lqh�hfwlyh/ zlwk uhvshfw wr frqwlqhqwdo Hxurshdq frxqwulhv1 Qhyhuwkhohvv/zlwk wkh h{fhswlrq ri Iudqfh dqg Jhupdq|/ sulfh hodvwlflwlhv iru h{sruwvdqg lpsruwv vdwlvi| wkh Pduvkdoo0Ohuqhu frqglwlrq1 Ilqdoo|/ zh �qg wkdwlqfrph hodvwlflwlhv ri X1V1 wudgh kdyh qrw ehhq vkliwlqj lq d gluhfwlrq wkdwlv olnho| wr hdvh wkh wuhqg wrzdug ghwhulrudwlrq lq wkh X1V1 wudgh srvlwlrq1Zh wkhuhiruh frqfoxgh wkdw d wuhqg uhdo ghsuhfldwlrq ri wkh groodu zloo ehqhhghg wr nhhs wkh X1V1 h{whuqdo gh�flw iurp jurzlqj hyhu zlghu
46
DSSHQGL[ D= GDWD
Wudgh Vkduhv1
WDEOH D04
Elodwhudo H{sruw Vkduhv
Iurp2wr Fdq Iud Jhu Lwd Mds X1N1 X1V1
Fdqdgd 3133< 3133; 31345 31356 31353 31534
Iudqfh 3133: 31449 3144; 31347 313<8 31356
Jhupdq| 31345 3149: 31493 31378 31456 31369
Lwdo| 3133: 313<9 313:8 3133< 3137< 31347
Mdsdq 31378 31357 3135: 3135; 31364 31436
Xqlwhg Nlqjgrp 31347 313;6 313;3 3138 31365 31379
Xqlwhg Vwdwhv 31::; 31396 313:7 313:8 315;8 31453
Rwkhu RHFG 31386 31658 3169: 315;5 31399 3166: 31444
Ph{lfr 31337 31336 31338 31336 3133; 31335 313:5
QLHv 3135; 31367 3136< 3136< 3157< 3137< 3144;
RSHF 31345 31367 31356 31366 31374 3136< 31364
URZ 31373 31496 314;: 31533 3155< 31467 31578
Wrwdo 4133 4133 4133 4133 4133 4133 4133
Vrxufh= LPI/ Gluhfwlrq ri Wudgh +4<<8,1
Qrwh= RHFG @ Rujdqlvdwlrq iru Hfrqrplf Fr0rshudwlrq dqg Ghyho0
rsphqw> RSHF @ Rujdql}dwlrq ri Shwurohxp H{sruwlqj Frxqwulhv>
QLHv @ qhzo| lqgxvwuldol}hg hfrqrplhv> URZ @ uhvw ri zruog11
Klvwrulfdo vhulhv1 Iljxuhv D04 wkurxjk D0: vkrz wkh vhulhv xvhg iruhvwlpdwlrq= uhdo lpsruwv ri jrrgv dqg vhuylfh/ uhdo JGS/ wkh sulfh ri lpsruwvuhodwlyh wr grphvwlf surgxfwv> uhdo h{sruwv ri jrrgv dqg vhuylfhv> iruhljqlqfrph> dqg wkh sulfh ri h{sruwv uhodwlyh wr wkh sulfh ri iruhljq surgxfwv/h{suhvvhg lq orfdo fxuuhqf|1 Wkh �jxuhv uhyhdo wzr ihdwxuhv frpprq wr doori wkh J0: frxqwulhv1 Iluvw/ iruhljq wudgh jurzv ryhu wlph lq frqmxqfwlrqzlwk iruhljq dqg grphvwlf lqfrph1 Vhfrqg/ uhodwlyh sulfhv iru wudgh rzvlq erwk gluhfwlrqv vkrz grzqzdug wuhqgv/ exw wkh ghfolqh lq wkh uhodwlyhsulfh ri lpsruwv lv pruh surqrxqfhg wkdq wkh ghfolqh lq wkh uhodwlyh sulfhri h{sruwv/ h{fhsw iru wkh Xqlwhg Vwdwhv zkhuh wkh rssrvlwh lv wuxh1
Rughu ri lqwhjudwlrq1 Wr ghwhuplqh wkh wlph0vhulhv surshuwlhv ri wkhyduldeohv/ zh hpsor| dq dxjphqwhg Glfnh|0Ixoohu whvw xvlqj d frqvwdqw/ dwuhqg/ dqg irxu odjv1 Ehfdxvh wkh whvw uhvxowv duh ehorz wkhlu fruuhvsrqglqjfulwlfdo ydoxhv/ zh fdqqrw uhmhfw wkh k|srwkhvlv wkdw wkhvh yduldeohv duhlqwhjudwhg ri rughu rqh +Wdeoh D05,1
47
1970 1975 1980 1985 1990 1995
11.5
12
12.5Export Volume
1970 1975 1980 1985 1990 1995
11.5
12
12.5 Import Volume
1970 1975 1980 1985 1990 1995
8
8.2
8.4 Foreign GDP
1970 1975 1980 1985 1990 1995
13.25
13.5
13.75Domestic GDP
1970 1975 1980 1985 1990 1995
-.5
-.25
0Relative Export Prices
1970 1975 1980 1985 1990 1995
-.5
-.25
0Relative Import Prices
FIGURE A-2: France: Trade, Income, and Prices
1970 1975 1980 1985 1990 1995
4.5
5
5.5 Export Volume
1970 1975 1980 1985 1990 1995
4.5
5
Import Volume
1970 1975 1980 1985 1990 1995
8.8
9
9.2 Foreign GDP
1970 1975 1980 1985 1990 1995
6
6.25
6.5
6.75 Domestic GDP
1970 1975 1980 1985 1990 1995
-.5
0
Relative Export Prices
1970 1975 1980 1985 1990 1995
-.5
0
Relative Import Prices
FIGURE A-3: Germany: Trade, Income, and Prices
1970 1975 1980 1985 1990 1995
10
10.5
11
11.5 Export Volume
1970 1975 1980 1985 1990 1995
10.5
11
Import Volume
1970 1975 1980 1985 1990 1995
8.2
8.4
Foreign GDP
1970 1975 1980 1985 1990 1995
12.25
12.5
12.75 Domestic GDP
1970 1975 1980 1985 1990 1995
0
.5 Relative Export Prices
1970 1975 1980 1985 1990 1995
0
.5Relative Import Prices
FIGURE A-4: Italy: Trade, Income, and Prices
1970 1975 1980 1985 1990 1995
9.5
10
10.5
11Export Volume
1970 1975 1980 1985 1990 1995
9.5
10
10.5
11 Import Volume
1970 1975 1980 1985 1990 1995
7
7.25
7.5
7.75 Foreign GDP
1970 1975 1980 1985 1990 1995
12.5
13 Domestic GDP
1970 1975 1980 1985 1990 1995
.2
.4Relative Export Prices
1970 1975 1980 1985 1990 1995
0
.5Relative Import Prices
FIGURE A-5: Japan: Trade, Income. and Prices
1970 1975 1980 1985 1990 1995
10
10.5Export Volume
1970 1975 1980 1985 1990 1995
10
10.5Import Volume
1970 1975 1980 1985 1990 19958
8.2
8.4Foreign GDP
1970 1975 1980 1985 1990 1995
11.5
11.75
Domestic GDP
1970 1975 1980 1985 1990 1995
-.25
0
.25
.5Relative Export Prices
1970 1975 1980 1985 1990 1995
-.25
0
.25
.5Relative Import Prices
FIGURE A-6: United Kingdom: Trade, Income, and Prices
1970 1975 1980 1985 1990 1995
5.5
6
6.5Export Volume
1970 1975 1980 1985 1990 1995
5.5
6
6.5
7 Import Volume
1970 1975 1980 1985 1990 19957.25
7.5
7.75Foreign GDP
1970 1975 1980 1985 1990 1995
8.25
8.5
8.75 Domestic GDP
1970 1975 1980 1985 1990 1995
0
.25
.5Relative Export Prices
1970 1975 1980 1985 1990 1995
0
.25
.5 Relative Import Prices
FIGURE A-7: United States: Trade, Income, and Prices
DSSHQGL[ E= ORQJ0UXQ HODVWLFLWLHV
H{sruwv
Hvwlpdwlrq1 Wdeoh E04 vkrzv/ iru h{sruwv/ wkh h�hfwv wkdw fkdqjlqj wkhodj ohqjwk +iurp wzr wr qlqh txduwhuv, kdv rq wkh qxpehu ri frlqwhjudwlrqyhfwruv/ wkh sdudphwhu hvwlpdwhv/ dqg wkh whvwv ri vhuldo fruuhodwlrq ri wkhuhvlgxdov edvhg rq d whvw ri zkhwkhu wkh frh!flhqwv ri d YDU+8, rq hdfkv|vwhp*v uhvlgxdov duh mrlqwo| }hur1 D gdjjhu +|, ehvlgh dq hqwu| lq wkh �uvwurz vkrzv wkh odj ohqjwk vhohfwhg> �ql� lqglfdwhv wkdw wkh hodvwlflwlhv duhqrw lghqwl�hg> dq dvwhulvn +�, ghqrwhv d uhmhfwlrq ri vhuldo lqghshqghqfh1Iru Iudqfh/ zh vhohfw wzr odjv> rwkhuzlvh/ wkh ordglqj frh!flhqw lv qrwvljql�fdqw1 Iru Jhupdq|/ zh vhohfw wzr odjv1 Iru wkh Xqlwhg Nlqjgrp/ zhvhohfw irxu odjv/ ghvslwh vhuldo fruuhodwlrq/ ehfdxvh wkh hodvwlflw| hvwlpdwhvduh forvh wr rqh1
Sdudphwhu vwdelolw|1 Iljxuhv E04 wkurxjk E0: vkrz Fkrz0whvw uhvxowv risdudphwhu vwdelolw| ri wkh frlqwhjudwlrq prgho iru h{sruwv1 Wkh whvwv iruwkh h{sruw htxdwlrq duh vkrzq rq wkh ohiw> wkh whvwv iru wkh ixoo v|vwhp duhvkrzq rq wkh uljkw dqg duh odehohg �FKRZ1� D furvvlqj ri wkh krul}rqwdoolqh dw d jlyhq gdwh ghqrwhv d uhmhfwlrq ri wkh k|srwkhvlv ri sdudphwhu frq0vwdqf| dw wkh 8 shufhqw ohyho iru wkdw gdwh1 Iru Fdqdgd/ wkh whvwv vxjjhvwvwdeoh hodvwlflwlhv wkurxjk 4<<6/ zlwk d vljql�fdqw fkdqjh lq wkrvh hodvwlf0lwlhv vwduwlqj lq 4<<71 Iru Iudqfh/ Jhupdq|/ dqg Lwdo|/ wkh whvwv vxjjhvwsdudphwhu lqvwdelolw| vwduwlqj lq 4<<6/ dw wkh wlph ri wkh Jhupdq uhxql�0fdwlrq1 Iru Mdsdq/ wkh Xqlwhg Nlqjgrp/ dqg wkh Xqlwhg Vwdwhv/ wkh whvwvvxssruw sdudphwhu frqvwdqf|1
H{ srvw suhglfwlrqv1 Iljxuhv E0; wkurxjk E047 vkrz wkh <8 shufhqwfrq�ghqfh lqwhuydov iru wkh prghov* rqh0vwhs0dkhdg suhglfwlrqv iru h{sruwviru 4<<804<<91 H{fhsw iru Lwdo| lq 4<<8=4/ qrqh ri wkh dfwxdo ydoxhv lv rxwvlghwkh frq�ghqfh lqwhuydov1 Suhglfwlrqv iru Lwdo|/ wkh Xqlwhg Nlqjgrp/ dqg wkhXqlwhg Vwdwhv/ krzhyhu/ duh rqh0vlghg/ dqg suhglfwlrq huuruv iru wkh XqlwhgNlqjgrp duh forvh wr ehlqj vljql�fdqw1
Lpsruwv
Hvwlpdwlrq1 Wdeoh E05 vkrzv/ iru lpsruwv/ wkh h�hfwv wkdw fkdqjlqjwkh odj ohqjwk +iurp wzr wr qlqh txduwhuv, kdv rq wkh qxpehu ri frlqwhjud0wlrq yhfwruv/ wkh sdudphwhu hvwlpdwhv/ dqg whvwv ri vhuldo fruuhodwlrq ri wkhuhvlgxdov edvhg rq d whvw ri zkhwkhu wkh frh!flhqwv ri d YDU+8, rq hdfkv|vwhp*v uhvlgxdov duh mrlqwo| }hur1 D gdjjhu +|, ehvlgh dq hqwu| lq wkh �uvwurz vkrzv wkh odj ohqjwk vhohfwhg> �ql� lqglfdwhv wkdw wkh hodvwlflwlhv duhqrw lghqwl�hg> dq dvwhulvn +�, ghqrwhv d uhmhfwlrq ri vhuldo lqghshqghqfh1
4<
1990 1991 1992 1993 1994 1995
1
21up 5%
1990 1991 1992 1993 1994 1995
1
21up CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2Nup 5%
1990 1991 1992 1993 1994 1995
1
2Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2Ndn 5%
1990 1991 1992 1993 1994 1995
1
2Ndn CHOWs 5%
FIGURE B-2: Exports for France: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
1
2
3 1up 5%
1990 1991 1992 1993 1994 1995
1
2
31up CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2
3Nup 5%
1990 1991 1992 1993 1994 1995
1
2
3Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2
3 Ndn 5%
1990 1991 1992 1993 1994 1995
1
2
3Ndn CHOWs 5%
FIGURE B-3: Exports for Germany: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
1
2
3 1up 5%
1990 1991 1992 1993 1994 1995
1
2
31up CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2
3 Nup 5%
1990 1991 1992 1993 1994 1995
1
2
3Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2
3 Ndn 5%
1990 1991 1992 1993 1994 1995
1
2
3Ndn CHOWs 5%
FIGURE B-4: Exports for Italy: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
.5
1 5% 1up
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
FIGURE B-5: Exports for Japan: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
1
21up 5%
1990 1991 1992 1993 1994 1995
1
21up CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2Nup 5%
1990 1991 1992 1993 1994 1995
1
2Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2Ndn 5%
1990 1991 1992 1993 1994 1995
1
2Ndn CHOWs 5%
FIGURE B-6: Exports for the U.K.: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
.5
1 5% 1up
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
FIGURE B-7: Exports for the U.S.: Chow Tests for the Cointegration Model
1994 1995 1996 1997
5.35
5.4
5.45
5.5
5.55
5.6
5.65Actual Forecast
1-step
FIGURE B-8: Exports for Canada: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
12.425
12.45
12.475
12.5
12.525
12.55
12.575
12.6Actual Forecast
1-step
FIGURE B-9: Exports for France: Predictive Accuracy of the Cointegration Model
1994 1995 1996 1997
5.2
5.225
5.25
5.275
5.3
5.325
5.35
5.375
5.4 Actual Forecast
1-step
FIGURE B-10: Exports for Germany: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
11.2
11.225
11.25
11.275
11.3
11.325
11.35
11.375
11.4
11.425Actual Forecast
1-step
FIGURE B-11: Exports for Italy: Predictive Accuracy of the Cointegration Model
1994 1995 1996 199710.85
10.875
10.9
10.925
10.95
10.975
11
11.025Actual Forecast
1-step
FIGURE B-12: Exports for Japan: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
10.525
10.55
10.575
10.6
10.625
10.65
10.675
10.7
10.725Actual Forecast
1-step
FIGURE B-13: Exports for the U.K.: Predictive Accuracy of the Cointegration
1994 1995 1996
6.525
6.55
6.575
6.6
6.625
6.65
6.675
6.7
6.725Actual Forecast
1-step
FIGURE B-14: Exports for the U.S.: Predictive Accuracy of the Cointegration
1990 1991 1992 1993 1994 1995
.5
11up Imports 5%
1990 1991 1992 1993 1994 1995
.5
1 1up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Nup 5%
1990 1991 1992 1993 1994 1995
.5
1 Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn CHOWs 5%
FIGURE B-15: Imports for Canada: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
.5
11up 5%
1990 1991 1992 1993 1994 1995
.5
11up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Nup 5%
1990 1991 1992 1993 1994 1995
.5
1Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn CHOWs 5%
FIGURE B-16: Imports for France: Chow Tests for the Cointegration Model
1990 1995
2.5
5
7.5 1up 5%
1990 1995
2.5
5
7.5 1up CHOWs 5%
1990 1995
2.5
5
7.5 Nup 5%
1990 1995
2.5
5
7.5Nup CHOWs 5%
1990 1995
2.5
5
7.5Ndn 5%
1990 1995
2.5
5
7.5Ndn CHOWs 5%
FIGURE B-17: Imports for Germany: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
.5
1 5% 1up
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn i
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
FIGURE B-18: Imports for Italy: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
.5
1 5% 1up
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup j
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
FIGURE B-19: Imports for Japan: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
.5
11up 5%
1990 1991 1992 1993 1994 1995
.5
11up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Nup 5%
1990 1991 1992 1993 1994 1995
.5
1Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn CHOWs 5%
FIGURE B-20: Imports for the U.K.: Chow Tests for the Cointegration Model
1990 1991 1992 1993 1994 1995
1
2
31up 5%
1990 1991 1992 1993 1994 1995
1
2
3 1up CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2
3Nup 5%
1990 1991 1992 1993 1994 1995
1
2
3 Nup CHOWs 5%
1990 1991 1992 1993 1994 1995
1
2
3Ndn 5%
1990 1991 1992 1993 1994 1995
1
2
3Ndn CHOWs 5%
FIGURE B-21: Imports for the U.S.: Chow Tests for the Cointegration Model
1994 1995 1996 1997
5.4
5.425
5.45
5.475
5.5
5.525
5.55
5.575
5.6
5.625Actual Forecast
1-step
FIGURE B-22: Imports for Canada: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
12.45
12.475
12.5
12.525
12.55
12.575
Actual Forecast
1-step
FIGURE B-23: Imports for France: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
5.2
5.225
5.25
5.275
5.3
5.325
5.35
5.375
Actual Forecast
1-step
FIGURE B-24: Imports for Germany: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
11.075
11.1
11.125
11.15
11.175
11.2
11.225Actual Forecast
1-step
FIGURE B-25: Imports for Italy: Predictive Accuracy of the Cointegration Model
1994 1995 1996 1997
10.7
10.75
10.8
10.85
10.9
10.95
11Actual Forecast
1-step
FIGURE B-26: Imports for Japan: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
10.6
10.625
10.65
10.675
10.7
10.725
10.75
10.775Actual Forecast
1-step
FIGURE B-27: Imports for the U.K.: Predictive Accuracy of the Cointegration
1994 1995 1996 1997
6.65
6.675
6.7
6.725
6.75
6.775
6.8
6.825
6.85
6.875
6.9Actual Forecast
1-step
FIGURE B-28: Imports for the U.S.: Predictive Accuracy of the Cointegration
DSSHQGL[ F= VKRUW0UXQ HODVWLFLWLHV
H{sruwv
Hvwlpdwlrq1 Wdeoh F04 vkrzv/ iru h{sruwv/ wkdw doo ri wkh frh!flhqwv kdyhwkhlu h{shfwhg vljqv dqg wkdw frxqwulhv gl�hu pdunhgo| lq wkhlu hvwlpdwhgdgmxvwphqw vshhgv/ udqjlqj iurp 6 shufhqw shu txduwhu +Xqlwhg Nlqjgrp,wr 7; shufhqw shu txduwhu +Jhupdq|,1 Wkh huuru0fruuhfwlrq frh!flhqw iruIudqfh/ Lwdo|/ dqg wkh Xqlwhg Vwdwhv lv qrw vljql�fdqw/ d �qglqj wkdw zhdnhqvwkh hylghqfh rq frlqwhjudwlrq1
WDEOH F04
H{sruwv= Sdudphwhu Hvwlpdwhv iurp wkh Huuru0Fruuhfwlrq Prgho
Fdq Iud Jhu Lwd Mds X1N1 X1V1
Lqfrph 413: 41;5 3188 5166 318< 413< 41;6
+3167, +3176, +3174, +3193, +3167, +3198, +317;,
Sulfh 0317; 0313< 03138 03166 03178 03157 03186
+3148, +3139, +3139, +3146, +3145, +3143, +3156,
HFP 03153 03134 0317; 03136 0314: 03136 03138
+313;, +3137, +313:, +3137, +3139, +3134, +3138,
U5 3184 3185 318: 3166 317< 31:7 317<
VHU 5184 419< 5163 6167 5137 414; 41:<
Vhuldo lqghs*qfh 3158 3154 314< 317; 3139 3139 314;
Krprvfhgdv*w| 313: 31;7 3183 314< 31<< 319< 3183
Qrupdolw| 3186 31:; 313< 3156 31<6 3174 317<
Ixqfwlrqdo irup 31<3 31;5 3139 31:9 31;: 31;: 3139
Vwduw vdpsoh :915 :916 :915 :916 ::16 ::16 :916
Qrwh= Vwdqgdug huuruv duh lq sduhqwkhvhv1
Wkh irupxodwlrqv h{sodlq dw ohdvw rqh0kdoi ri wkh yduldelolw| ri wkh jurzwkudwh ri h{sruwv/ h{fhsw iru Lwdo|/ zkhuh wkh| h{sodlq derxw rqh0wklug1 Il0qdoo|/ wkh hpslulfdo glvwulexwlrqv ri wkh uhvlgxdov vdwlvi| wkh dvvxpswlrqvpdlqwdlqhg iru hvwlpdwlrq +vhuldo lqghshqghqfh/ krprvfhgdvwlflw|/ qrupdo0lw|, lq doo fdvhv1 Iru krprvfhgdvwlflw|/ zh xvh d w0whvw ri wkh qxoo k|srwkhvlvwkdw wkh yduldqfh ri wkh uhvlgxdov lv frqvwdqw1 Iru qrupdolw|/ zh xvh d "5
whvw ri wkh qxoo k|srwkhvlv wkdw wkh glvwulexwlrq ri wkh uhvlgxdov lv qrupdo1Iru ixqfwlrqdo irup/ zh xvh d uhvhw whvw ri wkh qxoo k|srwkhvlv wkdw wkhvshfl�fdwlrq grhv qrw rplw frpelqdwlrqv ri wkh suhghwhuplqhg yduldeohv1
6;
1990 1991 1992 1993 1994 1995
.5
11up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1
Ndn CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Nup CHOWs 5%
FIGURE C-2: Exports for France: Chow Tests for the ECM Coefficients
1991 1992 1993 1994 1995
.5
1
1.51up CHOWs 5%
1991 1992 1993 1994 1995
.5
1
1.5Ndn CHOWs 5%
1991 1992 1993 1994 1995
.5
1
1.5 Nup CHOWs 5%
FIGURE C-3: Exports for Germany: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1
1.51up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1
1.5Ndn CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1
1.5 Nup CHOWs 5%
FIGURE C-4: Exports for Italy: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
FIGURE C-5: Exports for Japan: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1
1.5 1up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1
1.5Ndn CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1
1.5Nup CHOWs 5%
FIGURE C-6: Exports for the U.K.: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1
1.5 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1
1.5 5% Ndn CHOWs
1990 1991 1992 1993 1994 1995
.5
1
1.5 5% Nup CHOWs
FIGURE C-7: Exports for the U.S.: Chow Tests for the ECM Coefficients
1994 1995 1996 1997
-.04
-.02
0
.02
.04
.06
.08 Fitted Forecast
Actual
FIGURE C-8: Exports for Canada: Predictive Accuracy of the Error-Correction
1994 1995 1996 1997-.03
-.02
-.01
0
.01
.02
.03
.04
.05Fitted Forecast
Actual
FIGURE C-9: Exports for France: Predictive Accuracy of the Error-Correction
1994 1995 1996 1997
-.06
-.04
-.02
0
.02
.04
Fitted Forecast
Actual
FIGURE C-10: Exports forGermanyPredictiveAccuracyof theError-CorrectionModel
1994 1995 1996 1997-.1
-.075
-.05
-.025
0
.025
.05
.075 Fitted Forecast
Actual
FIGURE C-11: Exports for Italy: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997
-.04
-.02
0
.02
.04
.06
Actual Forecast
Fitted
FIGURE C-12: Exports for Japan: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997-.05
-.04
-.03
-.02
-.01
0
.01
.02
.03
Fitted Forecast
Actual
FIGURE C-13: Exports for theU.K.: Predictive Accuracy of the Error-Correction Model
sulfh vkrfnv> dqg wkh Xqlwhg Vwdwhv +4<9<=4)5> 4<:5=4)5> 4<:7=5, lqfoxghvyduldeohv iru grfn vwulnhv dqg sulfh frqwurov1
Sdudphwhu vwdelolw|1 Iljxuhv F048 wkurxjk F054 vkrz Fkrz whvwv irulpsruwv srlqwlqj wr d uhpdundeoh ghjuhh ri sdudphwhu frqvwdqf| dfurvvfrxqwulhv1
H{ srvw suhglfwlrqv1 Iljxuhv F055 wkurxjk F05; vkrz wkh <8 shufhqwfrq�ghqfh lqwhuydov iru wkh prghov* rqh0vwhs0dkhdg suhglfwlrqv iru lpsruwviru 4<<804<<91 H{fhsw iru Mdsdq lq 4<<8=5/ wkh dfwxdo ydoxhv iru wkhvhsuhglfwlrqv idoo zlwklq wkh <8 shufhqw frq�ghqfh lqwhuydov1 Suhglfwlrqv iruFdqdgd dqg Iudqfh/ krzhyhu/ xqghuvwdwh wkh jurzwk udwhv iru lpsruwv1
WDEOH F05
Lpsruwv= Sdudphwhu Hvwlpdwhv ri wkh Huuru0Fruuhfwlrq Prgho
Fdq Iud Jhu Lwd Mds X1N1 X1V1
Lqfrph 4159 4198 31<< 4134 4133 4134 5164
+3154, +3173, +3158, +316:, +316:, +3163, +3163,
Sulfh 03147 03139 0314: 0 03138 0 03188
+3149, +3147, +313;, +313<, +3147,
HFP 03144 03167 03143 03169 03137 03135 03137
+3137, +313:, +3135, +3139, +3135, +3134, +3136,
U5 3177 319: 317< 3175 3185 3156 3196
VHU 51:: 4196 5165 6135 51<4 51<4 517;
Vhuldo fruuho*wq 31<: 3154 3175 313; 315; 3138 3163
Krprvfhgdv*w| 31:< 3157 31;6 3189 3154 3135- 313;
Qrupdolw| 3134- 31:7 31<9 3167 318: 3133- 3145
Ixqfwrqdo irup 316; 3184 3135- 3137- 313< 31:; 3168
Vwduw vdpsoh 9415 :416 9;16 :316 8917 8817 9316
Qrwh= Vwdqgdug huuruv duh lq sduhqwkhvhv> - ghqrwhv vwdwlvwlfdo vljql�fdqfh dw wkh
8 shufhqw ohyho1
7:
1990 1991 1992 1993 1994 1995
.5
11up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Nup CHOWs 5%
FIGURE C-15: Imports for Canada: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
11up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Nup CHOWs 5%
FIGURE C-16: Imports for France: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
FIGURE C-17: Imports for Germany: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
11up CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Ndn CHOWs 5%
1990 1991 1992 1993 1994 1995
.5
1Nup CHOWs 5%
FIGURE C-18: Imports for Italy: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
FIGURE C-19: Imports for Japan: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
FIGURE C-20: Imports for the U.K.: Chow Tests for the ECM Coefficients
1990 1991 1992 1993 1994 1995
.5
1 5% 1up CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Ndn CHOWs
1990 1991 1992 1993 1994 1995
.5
1 5% Nup CHOWs
FIGURE C-21: Imports for the U.S.: Chow Tests for the ECM Coefficients
1994 1995 1996 1997
-.04
-.02
0
.02
.04
.06
.08Fitted Forecast
Actual
FIGUREC-22: Imports forCanada: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997
-.04
-.03
-.02
-.01
0
.01
.02
.03
.04
.05
Fitted Forecast
Actual
FIGURE C-23: Imports for France: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997
-.06
-.04
-.02
0
.02
.04
.06
.08Fitted Forecast
Actual
FIGURE C-24: Imports for Germany: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997
-.1
-.075
-.05
-.025
0
.025
.05
Fitted Forecast
Actual
FIGURE C-25: Imports for Italy: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997
-.075
-.05
-.025
0
.025
.05
Actual Forecast
Fitted
FIGURE C-26: Imports for Japan: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997
-.06
-.04
-.02
0
.02
.04
.06
Fitted Forecast
Actual
FIGURE C-27: Imports for the U.K.: Predictive Accuracy of the Error-Correction Model
1994 1995 1996 1997
-.06
-.04
-.02
0
.02
.04
.06
Actual Forecast
Fitted
FIGURE C-28: Imports for the U.S.: Predictive Accuracy of the Error-Correction Model
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56
PUBLICATIONS OF THEINTERNATIONAL ECONOMICS SECTION
Notice to ContributorsThe International Economics Section issues papers in three series. ESSAYS IN INTER-NATIONAL ECONOMICS (formerly Essays in International Finance) and PRINCETONSTUDIES IN INTERNATIONAL ECONOMICS (formerly Princeton Studies in Interna-tional Finance) contain new work not published elsewhere. REPRINTS IN INTERNA-TIONAL ECONOMICS (formerly Reprints in International Finance) reproduce journalarticles previously published by Princeton faculty members associated with theSection. A fourth series, SPECIAL PAPERS IN INTERNATIONAL ECONOMICS, wasdiscontinued in July 2000. The Section welcomes the submission of manuscripts forpublication under the following guidelines:
ESSAYS are meant to disseminate new views about international economic mattersand should be accessible to well-informed nonspecialists as well as to professionaleconomists. Technical terms, tables, and charts should be used sparingly; mathemat-ics should be avoided.
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International Economics SectionDepartment of Economics, Fisher HallPrinceton UniversityPrinceton, New Jersey 08544-1021Tel: 609-258-4048 • Fax: 609-258-1374E-mail: [email protected]
57
List of Recent Publications
A complete list of publications is available at the International Economics Sectionwebsite at www.princeton.edu/~ies.
ESSAYS IN INTERNATIONAL ECONOMICS
(formerly Essays in International Finance)
180. Warren L. Coats, Jr., Reinhard W. Furstenberg, and Peter Isard, The SDRSystem and the Issue of Resource Transfers. (December 1990)
181. George S. Tavlas, On the International Use of Currencies: The Case of theDeutsche Mark. (March 1991)
182. Tommaso Padoa-Schioppa, ed., with Michael Emerson, Kumiharu Shigehara,and Richard Portes, Europe After 1992: Three Essays. (May 1991)
183. Michael Bruno, High Inflation and the Nominal Anchors of an Open Economy.(June 1991)
184. Jacques J. Polak, The Changing Nature of IMF Conditionality. (September 1991)185. Ethan B. Kapstein, Supervising International Banks: Origins and Implications
of the Basle Accord. (December 1991)186. Alessandro Giustiniani, Francesco Papadia, and Daniela Porciani, Growth and
Catch-Up in Central and Eastern Europe: Macroeconomic Effects on WesternCountries. (April 1992)
187. Michele Fratianni, Jürgen von Hagen, and Christopher Waller, The MaastrichtWay to EMU. (June 1992)
188. Pierre-Richard Agénor, Parallel Currency Markets in Developing Countries:Theory, Evidence, and Policy Implications. (November 1992)
189. Beatriz Armendariz de Aghion and John Williamson, The G-7’s Joint-and-SeveralBlunder. (April 1993)
190. Paul Krugman, What Do We Need to Know About the International MonetarySystem? (July 1993)
191. Peter M. Garber and Michael G. Spencer, The Dissolution of the Austro-Hungarian Empire: Lessons for Currency Reform. (February 1994)
192. Raymond F. Mikesell, The Bretton Woods Debates: A Memoir. (March 1994)193. Graham Bird, Economic Assistance to Low-Income Countries: Should the Link
be Resurrected? (July 1994)194. Lorenzo Bini-Smaghi, Tommaso Padoa-Schioppa, and Francesco Papadia, The
Transition to EMU in the Maastricht Treaty. (November 1994)195. Ariel Buira, Reflections on the International Monetary System. (January 1995)196. Shinji Takagi, From Recipient to Donor: Japan’s Official Aid Flows, 1945 to 1990
and Beyond. (March 1995)197. Patrick Conway, Currency Proliferation: The Monetary Legacy of the Soviet
Union. (June 1995)198. Barry Eichengreen, A More Perfect Union? The Logic of Economic Integration.
(June 1996)199. Peter B. Kenen, ed., with John Arrowsmith, Paul De Grauwe, Charles A. E.
Goodhart, Daniel Gros, Luigi Spaventa, and Niels Thygesen, Making EMUHappen—Problems and Proposals: A Symposium. (August 1996)
58
200. Peter B. Kenen, ed., with Lawrence H. Summers, William R. Cline, BarryEichengreen, Richard Portes, Arminio Fraga, and Morris Goldstein, From Halifaxto Lyons: What Has Been Done about Crisis Management? (October 1996)
201. Louis W. Pauly, The League of Nations and the Foreshadowing of the Interna-tional Monetary Fund. (December 1996)
202. Harold James, Monetary and Fiscal Unification in Nineteenth-Century Germany:What Can Kohl Learn from Bismarck? (March 1997)
203. Andrew Crockett, The Theory and Practice of Financial Stability. (April 1997)204. Benjamin J. Cohen, The Financial Support Fund of the OECD: A Failed
Initiative. (June 1997)205. Robert N. McCauley, The Euro and the Dollar. (November 1997)206. Thomas Laubach and Adam S. Posen, Disciplined Discretion: Monetary Target-
ing in Germany and Switzerland. (December 1997)207. Stanley Fischer, Richard N. Cooper, Rudiger Dornbusch, Peter M. Garber,
Carlos Massad, Jacques J. Polak, Dani Rodrik, and Savak S. Tarapore, Shouldthe IMF Pursue Capital-Account Convertibility? (May 1998)
208. Charles P. Kindleberger, Economic and Financial Crises and Transformationsin Sixteenth-Century Europe. (June 1998)
209. Maurice Obstfeld, EMU: Ready or Not? (July 1998)210. Wilfred Ethier, The International Commercial System. (September 1998)211. John Williamson and Molly Mahar, A Survey of Financial Liberalization.
(November 1998)212. Ariel Buira, An Alternative Approach to Financial Crises. (February 1999)213. Barry Eichengreen, Paul Masson, Miguel Savastano, and Sunil Sharma,
Transition Strategies and Nominal Anchors on the Road to Greater Exchange-Rate Flexibility. (April 1999)
214. Curzio Giannini, “Enemy of None but a Common Friend of All”? An Interna-tional Perspective on the Lender-of-Last-Resort Function. (June 1999)
215. Jeffrey A. Frankel, No Single Currency Regime Is Right for All Countries or atAll Times. (August 1999)
216. Jacques J. Polak, Streamlining the Financial Structure of the InternationalMonetary Fund. (September 1999)
217. Gustavo H. B. Franco, The Real Plan and the Exchange Rate. (April 2000)218. Thomas D. Willett, International Financial Markets as Sources of Crises or
Discipline: The Too Much, Too Late Hypothesis. (May 2000)219. Richard H. Clarida, G-3 Exchange-Rate Relationships: A Review of the Record
and of Proposals for Change. (August 2000)
PRINCETON STUDIES IN INTERNATIONAL ECONOMICS
(formerly Princeton Studies in International Finance)
69. Felipe Larraín and Andrés Velasco, Can Swaps Solve the Debt Crisis? Lessonsfrom the Chilean Experience. (November 1990)
70. Kaushik Basu, The International Debt Problem, Credit Rationing and LoanPushing: Theory and Experience. (October 1991)
71. Daniel Gros and Alfred Steinherr, Economic Reform in the Soviet Union: Pas de Deux
59
between Disintegration and Macroeconomic Destabilization. (November 1991)72. George M. von Furstenberg and Joseph P. Daniels, Economic Summit Decla-
rations, 1975-1989: Examining the Written Record of International Coopera-tion. (February 1992)
73. Ishac Diwan and Dani Rodrik, External Debt, Adjustment, and Burden Sharing:A Unified Framework. (November 1992)
74. Barry Eichengreen, Should the Maastricht Treaty Be Saved? (December 1992)75. Adam Klug, The German Buybacks, 1932-1939: A Cure for Overhang?
(November 1993)76. Tamim Bayoumi and Barry Eichengreen, One Money or Many? Analyzing the
Prospects for Monetary Unification in Various Parts of the World. (September 1994)77. Edward E. Leamer, The Heckscher-Ohlin Model in Theory and Practice.
(February 1995)78. Thorvaldur Gylfason, The Macroeconomics of European Agriculture. (May 1995)79. Angus S. Deaton and Ronald I. Miller, International Commodity Prices, Macro-
economic Performance, and Politics in Sub-Saharan Africa. (December 1995)80. Chander Kant, Foreign Direct Investment and Capital Flight. (April 1996)81. Gian Maria Milesi-Ferretti and Assaf Razin, Current-Account Sustainability.
(October 1996)82. Pierre-Richard Agénor, Capital-Market Imperfections and the Macroeconomic
Dynamics of Small Indebted Economies. (June 1997)83. Michael Bowe and James W. Dean, Has the Market Solved the Sovereign-Debt
Crisis? (August 1997)84. Willem H. Buiter, Giancarlo M. Corsetti, and Paolo A. Pesenti, Interpreting the
ERM Crisis: Country-Specific and Systemic Issues. (March 1998)85. Holger C. Wolf, Transition Strategies: Choices and Outcomes. (June 1999)86. Alessandro Prati and Garry J. Schinasi, Financial Stability in European Economic
and Monetary Union. (August 1999)87. Peter Hooper, Karen Johnson, and Jaime Marquez, Trade Elasticities for the
G-7 Countries. (August 2000)
SPECIAL PAPERS IN INTERNATIONAL ECONOMICS
17. Richard Pomfret, International Trade Policy with Imperfect Competition. (August 1992)18. Hali J. Edison, The Effectiveness of Central-Bank Intervention: A Survey of the
Literature After 1982. (July 1993)19. Sylvester W.C. Eijffinger and Jakob De Haan, The Political Economy of Central-
Bank Independence. (May 1996)20. Olivier Jeanne, Currency Crises: A Perspective on Recent Theoretical Develop-
ments. (March 2000)
REPRINTS IN INTERNATIONAL ECONOMICS
(formerly Reprints in International Finance)
29. Peter B. Kenen, Sorting Out Some EMU Issues; reprinted from Jean Monnet ChairPaper 38, Robert Schuman Centre, European University Institute, 1996.(December 1996)
60
The work of the International Economics Section is supportedin part by the income of the Walker Foundation, establishedin memory of James Theodore Walker, Class of 1927. Theoffices of the Section, in Fisher Hall, were provided by agenerous grant from Merrill Lynch & Company.
ISBN 0-88165-259-8Recycled Paper