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Borrowing constraints and the trade balance–output comovement

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  • Zhao, Yan

Abstract

The countercyclical trade balance ratio is among the key stylized facts about open economies. The magnitude of the correlation between the trade balance and output, however, differs from country to country. In particular, the trade balance ratio is more negatively correlated with output in emerging economies than in developed economies, suggesting that the trade balance is more sensitive to output changes in the former than in the latter. This paper explores whether this difference is caused by international borrowing constraints imposed on emerging economies.

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  • Zhao, Yan, 2013. "Borrowing constraints and the trade balance–output comovement," Economic Modelling, Elsevier, vol. 32(C), pages 34-41.
    • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:34-41
    DOI: 10.1016/j.econmod.2013.01.024
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    More about this item

    Keywords

    Real business cycle; Small open economy; Borrowing constraints;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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