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An examination of international trade data in the 1980s

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  • Michael Dotsey

Abstract

This article examines three competing hypotheses and their ability to explain events in international financial markets during the 1980s. The rival hypotheses view the trade deficit as caused alternatively by large U.S. budget deficits, by tight U.S. monetary policy, or by real shocks to investment resulting from changes in the U.S. tax code. While no entirely consistent explanation emerges, the real-shock hypothesis seems to match the data best.

Suggested Citation

  • Michael Dotsey, 1989. "An examination of international trade data in the 1980s," Economic Review, Federal Reserve Bank of Richmond, vol. 75(Mar), pages 21-27.
    • Handle: RePEc:fip:fedrer:y:1989:i:mar:p:21-27:n:v.75no.2
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    References listed on IDEAS

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    1. Olivier J. Blanchard & Lawrence H. Summers, 1984. "Perspectives on High World Real Interest Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 273-334.
    2. Eisner, Robert, 1989. "Divergences of Measurement and Theory and Some Implications for Economic Policy," American Economic Review, American Economic Association, vol. 79(1), pages 1-13, March.
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    Keywords

    International trade; Foreign exchange;

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