International trade in a disequilibrium model

Wolfgang Franz, Gustav W. Heidbrink and Wolfgang Scheremet

No 124, Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy"

Abstract: The present paper is confined to a macroeconometric disequilibrium model for the Federal Republic of Germany. The model consists of three main building blocks: goods and labour markets and a monetary sector. Allowing for spillovers between goods and labour markets our main concern is to explain the fluctuations of aggregate output and employment. Their flexibility depends on the time span under consideration. Output and employment decisions are modelled by a three step structure. The econometric set-up emphasizes the importance of international trade flows within a disequilibrium framework. In these models international trade is influenced by supply and demand constraints on national goods markets. More specially, imports lower national supply constraints whereas exports can be hindered by excess demand on domestic markets. These hypotheses are tested for bilateral trade flows of the FRG with five EC-countries and the USA. Our estimation results show a significant influence on imports while there is little if any evidence that exports are influenced by excess demand on home markets. The dynamic Performance of the model is discussed in the last part of the paper.

Date: 1990
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