The Bilateral USA-Mexico Trade Balances Under Decomposed Export Data

Serdar Ongan (), Huseyin Karamelikli, Mine Aysen Doyran (), Ismet Gocer (), Charles A. Rarick () and John Mellon ()
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Serdar Ongan: University of South Florida
Mine Aysen Doyran: Lehman College
Ismet Gocer: The University of Strathclyde
Charles A. Rarick: Purdue University Northwest Hammond
John Mellon: Thomas Edison State University

Journal of Industry, Competition and Trade, 2023, vol. 23, issue 3, No 3, 186 pages

Abstract: Abstract This study re-formulates and re-examines the traditional bilateral trade balance (TB) concept (ratio) in the USA-Mexico case using a different methodology. This re-examination is constructed on newly formulated decomposed-export-based TBs—namely, domestic-export-based TB and re-export-based TB. Since the undecomposed traditional total-export-based TB is expressed as a total export/import ratio, it may misrepresent the actual nature of bilateral trade of this country with Mexico because the USA also considerably re-exports to Mexico. The main empirical finding confirms the need for using decomposed-export-based TBs in trade models for the USA since the impacts of exchange rate and income on undecomposed and decomposed export-based TBs of the USA are entirely different. For example, while depreciation in the USD improves the re-export-based TB for only 13 commodities, the same change in the USD improves the domestic-export-based TB for 18. Some empirical inferences from findings are as follows: (i) Mexican consumers (MC) with a stronger Peso purchase US domestically produced commodities more than re-exported ones; (ii) MC with a weaker Peso stop purchasing US re-exported commodities more than the US domestically produced ones; (iii) MC are appreciated/depreciated-Peso-sensitive to US domestically produced commodities more than re-exported ones.

Keywords: Trade balance; Decomposed trade balance; USMCA; Nonlinear ARDL approach (search for similar items in EconPapers)
JEL-codes: F10 F14 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10842-023-00401-6

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