Revisiting Japan's External Adjustment Since 1985

Guy Meredith

No 1993/052, IMF Working Papers from International Monetary Fund

Abstract: The factors that explain Japan’s external performance since the mid-1980s are controversial. While the current account surplus eventually declined following exchange rate changes in 1985-86, a widening since 1990 has led to renewed scepticism about the role of relative price movements in bringing about external adjustment. This paper revisits the post-1985 experience to determine whether it can be explained by traditional factors. The results indicate that, over the period as a whole, the behavior of trade volumes and prices was similar to that predicted by traditional relationships. In particular, relative price movements played an important role in reducing the surplus: in their absence, it would have widened further.

Keywords: WP; price elasticity; price movement; export volume; oil price shock; price equation; Export prices; Exports; Imports; Import prices; Trade balance (search for similar items in EconPapers)
Pages: 26
Date: 1993-06-01
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