Do recent data provide evidence that the US trade deficit will correct itself?

Albert Wijeweera and John Deskins ()

Applied Economics Letters, 2010, vol. 17, issue 1, 31-35

Abstract: We use monthly data from the 23 largest US trading partners for the years 1985-2005 to examine the long-run relationship between imports and exports. Results indicate that a long-run equilibrium relationship is identifiable in most of the countries we analyse. However, the country with which the US has the largest trade deficits do not exhibit any long-run relationship, indicating that any self-correcting mechanism on the trade account is either nonexistent or slow in these cases. Further, the presence of a long-run relationship is most apparent in the countries with which the US has a trade surplus. Taken together, these results provide evidence that continued growth in the US trade deficit is likely.

Date: 2010
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DOI: 10.1080/13504850701719751

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