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Macroeconomic and Sectoral Effects of International Trade: A Vector Error-Correction Study

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  • Farrokh Nourzad

Abstract

This study examines various claims that in the U.S., international trade has contributed to a loss of manufacturing base, an increased gap between unskilled and skilled wages, lower employment, and a loss of productivity. Cointegration tests indicate that in the long run and at the macro level, the ratio of trade to output and FDI to output are correlated with the manufacturing share of output, the ratio of unskilled to skilled wages, labor productivity, and the employment rate. However, Granger causality tests reveal that, with one exception, causation does not run from trade to the domestic variables, the only exception being that FDI Granger causes productivity. When the focus is shifted to the manufacturing sector, the results support the proposition that openness to trade has had adverse effects on this sector. Copyright IAES 2005

Suggested Citation

  • Farrokh Nourzad, 2005. "Macroeconomic and Sectoral Effects of International Trade: A Vector Error-Correction Study," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(1), pages 43-54, March.
    • Handle: RePEc:kap:atlecj:v:33:y:2005:i:1:p:43-54
    DOI: 10.1007/s11293-005-1644-1
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    References listed on IDEAS

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    More about this item

    Keywords

    C32; E10; F40;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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