Using Structural Break Tests to Evaluate Policy Change: The Impact of U.S.-Japan Trade Agreements

Byron Scott Gangnes () and Craig Gangnes ()
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Craig Gangnes: Department of Economics, Yokohama National University

No 200217, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: Empirical evaluations of trade agreements often rely on descriptive statistics or univariate time series methods to detect subsequent changes in trade flows. We conduct a more satisfactory test by evaluating an agreement in the context of a structural econometric model. Consistent with trade theory, import demand is modeled as a cointegrating relationship with income and relative price variables, where trade agreements may cause structural changes in cointegrating vectors. This approach is applied to study the effect of several U.S.-Japan market-opening trade agreements; in three of seven industries we find evidence of structural change that may be related to trade agreements.

Keywords: structural break tests; U.S.-Japan trade agreements; import promotion policies (search for similar items in EconPapers)
JEL-codes: F13 F14 C32 (search for similar items in EconPapers)
Date: 2002
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