The role of asymmetry in the interplay between internal and external factors: Empirical evidence from the US, Brazil, Canada and Mexico

Kaya Tokmakcioglu (), Oguzhan Ozcelebi () and Ali Sezin Ozdemir ()
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Kaya Tokmakcioglu: Faculty of Management Engineering, Department of Management Engineering, Istanbul Technical University. Macka Campus, 34343 Besiktas, Istanbul, Turkey
Oguzhan Ozcelebi: Faculty of Economics, Department of Economics, Istanbul University. Beyazit Campus, 34542 Beyazit, Istanbul, Turkey
Ali Sezin Ozdemir: Faculty of Management Engineering, Department of Management Engineering, Istanbul Technical University. Macka Campus, 34343 Besiktas, Istanbul, Turkey

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2019, vol. 37, issue 1, 55-75

Abstract: In this study, the real economic activity and monetary policy in the US are examined in comparison with the foreign trade balance and exchange rates, using Qual VAR and nonlinear VAR models. We found that the foreign trade with Brazil, Canada and Mexico do not lead to a possible recession in the US. The value of the domestic currency of Brazil, Canada and Mexico against the US dollar does not contribute to a possible recession over the foreign exchange market. We also show that a contraction in the US economy and contractionary monetary policy will lead to the appreciation of the US dollar by leading to capital inflows. Although the shadow interest rate may have asymmetric effects on the foreign trade balance with Canada and USD/CAD, we find that the foreign trade balance with Mexico and USD/MXN will be affected positively/negatively by an increase/decrease in the shadow interest rate.

Keywords: shadow interest rate; exchange rate; foreign trade balance; Qual VAR; non-linear VAR (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:rfe:zbefri:v:37:y:2019:i:1:p:55-75

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