Do recent data provide evidence that the US trade deficit will correct itself?
Wijeweera, A & Deskins, JA 2010, 'Do recent data provide evidence that the US trade deficit will correct itself?', Applied Economics Letters, vol. 17., no. 1, pp. 31-35.
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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.