The Cyclical Behavior of Net Exports: Temporary and Persistent Movements

Kerk L Phillips

Review of International Economics, 1996, vol. 4, issue 1, 79-89

Abstract: This paper explores the empirical relationship of net exports, domestic output, and foreign output. It presents evidence supporting a consumption-smoothing motive for trade in goods. Classical models of the international macroeconomy typically allow for trade in claims on both home and foreign output. This paper lends empirical support to this setup by showing that highly transitory shocks to output cause net exports from the country experiencing the shock to rise. Persistent shocks have opposite effects--a result consistent with the role persistent shocks play in signaling future investment opportunities. Copyright 1996 by Blackwell Publishing Ltd.

Date: 1996
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