Trade Balance Research Articles

Macroeconomics Factors Affecting Net Exports of Oil Palm Industry in Malaysia

This quantitative study investigates the impact of oil palm production, oil palm pricing, inflation, and GDP growth rate on the net exports of Malaysia's oil palm industry. This research is aimed at analyzing how the net export of oil palm relates to certain macroeconomic variables. This study has employed multiple regression analysis through Ordinary Least Squares for 26 years of time series data from 1996 to 2020 in Malaysia. The findings from this study improve our understanding of the major factors contributing to net exports in the oil palm industry. Palm oil production, price, as well as GDP growth, drive net export of palm oil in Malaysia found during this research. An increase in production leads to the reduced amount of palm oil exported, all other things remaining constant. Conversely, inflation and GDP growth are major drivers behind the increased net export of palm oil.

Brexit and the Services Trade—A Longitudinal Analysis

This study investigates the impact of Brexit uncertainty on the UK's services sector trade from 2016 to 2019 revealing a statistically significant negative impact that varied across sectors and destinations. Using the OECD-WTO Balanced Trade in Services dataset and synthetic difference in differences methodology, the findings indicate an annual shortfall of US$23.7/£18.5 billion in UK services exports compared to a scenario where the UK remained in the EU, translating to a 5.65 percent reduction. The bilateral data suggests an 8.5 percent average decline, with larger exports to countries like Germany and the US being less affected than smaller bilateral exports. The UK bilateral exports to the EU declined by 6.21 percent, while Ireland’s exports expanded by 21.4 percent. The study highlights that small firms were disproportionately impacted, leading to a decline in trade openness and export activities. Methodological sensitivity is underscored, with various approaches estimating Brexit’s impact differently. Sectoral analysis shows significant declines in Travel, Insurance, Finance, Telecom, Business and Cultural Services. Ireland notably benefited post-Brexit, experiencing a 14.75 percent annual increase in services exports due to business relocations. The study emphasizes the critical yet underexplored consequences of economic disintegration on international trade in services, providing essential evidence for future UK-EU trade relations post-Brexit.

Real Exchange Rate Depreciation and Domestic Tax Revenue Performance in Kenya

Purpose: Taxation plays a critical role in raising the resources needed for financing government activities in developing countries. On the other hand, the volatility of real exchange rates (RERs) has generated significant concern among academics and policymakers in view of its effects on macroeconomic variables such as tax revenue generation. This study therefore focused on real exchange rate depreciation on domestic tax revenue performance in Kenya. The study was guided Theory of Constraints. Methodology: The study employed an explanatory research design. Secondary data was collected from the CBK, KRA, and the World Bank. In this study time series data ranging from 2003 – 2023 was used to analyze the determinants of domestic tax revenue performance in Kenya. The hypotheses were tested at a significance level of .05 using the multiple regression analysis. A multivariate time series ARDL regression analysis model was used to analyze the data. Results: The study ARDL model concluded that Real exchange rate depreciation led to a notable decrease in domestic tax revenue performance, with β = -0.223945 and p = 0.000 < 0.05. This effect is intensified when considering the lagged impact, where a one-period lagged depreciation results in an even greater reduction in tax revenue performance, β = -1.927412 and p = 0.0004 < 0.05. Conclusion: The study recommended that government of Kenya should stabilize the exchange rate and prevent excessive depreciation by fostering a favorable trade balance and maintaining investor confidence. Additionally, future research could focus on the effects of fiscal Policy Changes on domestic tax revenue performance. Also, future studies could examine Impact of Global Economic Shocks on Domestic Tax Revenue.

Understanding Deflationary Trends in China: Internal and External Factors Analysis

This paper investigates the recent deflationary trend observed in China, exploring its underlying causes from both internal and external perspectives. Since the 1970s, China has undergone significant economic reforms, embraced market principles and experienced a substantial expansion in its money supply. Despite expectations of inflation due to the substantial money supply relative to GDP, China has experienced a period of low or negative inflation rates since April 2023. This study examines potential factors contributing to this deflationary period, including exchange rate fluctuations, monetary policy dynamics, economic structural shifts, and external shocks. Furthermore, the paper evaluates the development of transmission routes of monetary policy and possible impacts on the responsiveness of price level to money supply, particularly within the context of China's evolving financial system. Additionally, it analyses shifts in the key drivers of the Chinese economyinvestment, net exports, and consumptionand their role in exacerbating deflationary pressures. The study extends its analysis to February 2024, observing potential signs of a transition away from deflation. It emphasizes the risks associated with deflation and the Chinese government's efforts to balance inflation targets with economic stability and employment objectives, particularly in light of challenges in the real estate sector.

Diversification and the Resource Curse: An Econometric Analysis of GCC Countries

This research explores the effects of significant global economic shocks, such as the 2008 Global Financial Crisis and the 2020 COVID-19 pandemic, on GDP growth in the Gulf Cooperation Council (GCC) nations. Employing a dynamic generalized method of moments (GMM) model, the analysis highlights the strong momentum effect of lagged GDP growth, where past performance plays a critical role in shaping current economic outcomes. The findings also reveal that natural resources continue to positively influence short-term growth, but with diminishing returns over time, supporting the resource curse hypothesis and underscoring the need for broader structural reforms to ensure long-term sustainability. In addition, the results show that external investments flowing into the country, trade balance, and inflation emerge as key drivers of economic growth. While moderate inflation is positively associated with economic expansion, unemployment exerts a significant negative effect on GDP growth, particularly in models that account for country-specific characteristics. This emphasizes the need for labor market reforms to improve employment rates and support sustainable development. The role of gross capital formation, particularly in both the dynamic GMM and random effects models, further underscores the importance of strategic domestic investment, especially during periods of global disruption. These findings emphasize the critical need for economic diversification in the GCC. Policymakers should focus on attracting foreign investment, managing inflation, enhancing human capital, and boosting domestic investment to mitigate the adverse effects of the resource curse and secure sustainability. While market capitalization and oil rents may stimulate short-term growth, their long-term sustainability remains uncertain without greater diversification. Both external and domestic investments emerge as critical drivers of long-term growth, while persistent challenges such as inflation and unemployment continue to pose risks to economic stability. The study highlights the need to reduce reliance on oil and leverage human capital to build more resilient economies capable of adapting to future challenges. By offering dynamic, empirical insights into the balance between resource reliance and sustainable growth, this research adds valuable insights to the policy discussion on economic diversification in the GCC. Policymakers are urged to prioritize FDI, inflation management, domestic capital formation, and human capital development to mitigate vulnerabilities and ensure sustainable economic growth in the face of ongoing global uncertainties.

Euroization of the Economy and the Negative Impact of the Strengthening of the Local Currency on Exports and Other Economic Indicators in Albania

The Albanian economy is a small and open economy. As such, it is quickly influenced by the turbulence of the global, European, and regional economies. Economic theory emphasizes the link between the exchange rate, exports, the consumer price index, and the balance of foreign trade. The purpose of this article is to study the impact of the exchange rate, primarily at the export level, while also considering other economic factors within the framework of the overvaluation of the Albanian currency (ALL) against the currencies of partner countries, mainly the Euro. The overvaluation of the Albanian currency has led to discouraging exports and increasing imports, influencing the rise in the Consumer Price Index, meaning higher consumer prices. This is due to the fact that the Albanian economy is mainly dependent on imports. The empirical and econometric models used, along with the factors included in this study according to the hypotheses raised, are related to assessing the mutual relationships of the exchange rate with other economic factors for the time period 2018-2023.The results imply and depict the integrated relationship between the exchange rate and exports and other economic factors, as well as supporting the fact that the real exchange rate (RER) has deviated from its equilibrium level. The conclusions in this study confirm that an overvalued domestic currency has increased costs for operations conducted in the local currency ALL, reducing income for operations conducted in Euro and other currencies. This overvaluation of the domestic currency has resulted in losses for exporting companies, impacting the trade balance. Based on the findings in this study, it is crucial for financial institutions and policymakers to be consistent in monitoring the exchange rate, especially EUR/ALL, to improve the long-term relationships between the exchange rate, exports, and other economic factors.

Investigating The Validity of The Marshall-Lerner Principle and J-Curve Theory in Relation to Real Exchange Rates and Trade Imbalances: An Empirical Study of China's Economic Dynamics

According to traditional macroeconomic theory, meeting the Marshall-Lerner condition suggests that currency devaluation could positively impact the long-term trade balance. This implies that despite initial import cost increases, enhanced export competitiveness from a weaker currency eventually leads to trade balance improvements. However, short-term negative effects, known as the J-curve effect, may occur due to trade volume adjustments lagging currency devaluations. This study aims to assess the validity of the Marshall-Lerner condition in China's economy from 1995: Q1 to 2023: Q4 and evaluate the short-term J-curve effect's magnitude. Analyzing economic indicators and exchange rate fluctuations, the research confirms the validity of the Marshall-Lerner condition and supports the existence of the J-curve effect. These findings highlight the importance of nuanced currency policymaking for sustainable economic growth and stability, considering both short-term adjustments and long-term objectives. Key Words: Marshall-Lerner Condition, J Hypothesis, Foreign Trade.

International trade makes European food markets less vulnerable to concurrent and recurrent climate extremes

Abstract Extreme weather events are occurrences of unusually severe weather or climate conditions that can devastate local communities, agriculture and natural ecosystems. Due to climate change, these extreme events are becoming increasingly more likely, lasting longer, and more severe in impact. In this paper, we illustrate the potential effects of concurrent and recurrent extreme weather events on EU agricultural commodity markets and, in particular, on production and trade. A combination of concurrent and recurrent events is expected to have a negative and compounding effect on domestic food supply and trade, making EU agricultural markets less resilient. A set of scenarios based on record low yields show how EU production could be drastically affected in the coming two years compared to a business-as-usual situation. Market disruptions would be potentially larger for commodities in which the EU has a strong net exporter position, such as wheat. In the absence of extremes in non-EU regions, trade reveals as a key element in buffering the adverse impacts of extreme events in the EU.

Effects of Income Distribution and Fiscal Policy on Growth in Turkey: A Kaleckian Analysis

This study examines the effects of functional income distribution and fiscal policy on growth in Turkey. A post-Kaleckian open economy model is used to analyze the Turkish economy by integrating fiscal policy tools into the econometric model, such as tax burdens on labor and capital and government expenditure for 1988–2017. The novelty of our study is that it considers the private profit motive and rollback of government activities by including public-private partnership investments in the model. Our findings suggest that government ideologies in providing services through different channels do not cause alteration in the domestic demand regime; it stays wage-led in all scenarios we applied. Yet, the overall regime turns out to be profit-led since net export is sensitive to labor costs. JEL Classification: E12, E62, L33

Texas trade in forest products industry

Texas boasts abundant forest resources, providing substantial economic and ecological benefits statewide. This study examines the trends in forest product trade within Texas over the past two decades, focusing on key disruptions during this period. The analysis categorizes the forest products industry into two main markets: solid wood and paper and pulp, further dividing the industry into five core sectors. The findings indicate that Texas operates as a net importer of solid wood and wood furniture products while serving as a net exporter of wood pulp and, paper and paperboard products. Both import and export values have generally shown a gradual increase over time. Notably, Mexico emerged as Texas’s primary trade partner for both imports and exports in 2023. Additionally, Texas ranks as the second-largest exporter of paper and paperboard products nationally while also being the second-largest importer of solid wood products and wood furniture products. The study highlights the profound impact of the COVID-19 pandemic response on Texas’s trade dynamics, emphasizing the crucial need for ongoing monitoring of trade policies and international relationships. These factors have the potential to exert significant influence on Texas’s trade landscape in the foreseeable future.

Responsiveness of United States – China bilateral commodity trade to real exchange rate misalignment: Does the complexity of traded products matter?

This paper assesses the impact of real exchange rate (RER) misalignment on the trade balance between the United States and China, accounting for the complexity of traded products. We employ two recent econometric techniques: the panel autoregressive distributed lag (ARDL) model to estimate both long – and short-run dynamics, and the dynamic panel threshold model of Seo, M. H., and Y. Shin (2016. “Dynamic Panels with Threshold Effect and Endogeneity.” Journal of Econometrics 195 (2): 169–186) to uncover potential non-linearities and identify critical thresholds that could lead to a regime shift. Using highly disaggregated trade data at the HS 06-digit level, encompassing 913 products from 2004 to 2020, our findings reveal a negative impact of RER misalignment on the United States’ trade balance with China. However, this detrimental effect is significant only in industries dealing with less complex products. In contrast, industries handling highly complex products show a notably positive impact. Furthermore, our results suggest that industries can benefit from an undervalued exchange rate only when they have a relatively high level of product complexity. Additionally, heightened product complexity can mitigate any adverse effects overvaluation might have on the trade balance.

The Impact of Real Exchange Rate and Gross Domestic Product on Trade Balance of Lao-Thailand

The objectives of this study are to analyze the effect of the real exchange rate of kip to baht and gross domestic product on the trade balance between Lao-Thai in both short-run and long-run effects. The time series data from 1990-2021 was usedand implied with the ARDL model. The stationary of each variable was tested by Augmented Dickey Fuller (ADF) method. The empirical analysis by the ARDL model show that there is a long-run relationship. In the long run, the real exchange rate and the gross domestic product of Thailand have a negative relationship with the trade balance at a statistical significance level of 0.01. Meanwhile, the gross domestic product of the Lao PDR has a positive relationship. In the short term, only the gross domestic product of Lao PDR has a negative relationship with the trade balance at a significance level of 0.05. The gross domestic product of Thailand has the most effect on the trade balance, followed by the gross domestic product of the Lao PDR and the real exchange rate of kip per baht has the least effect. The coefficient of speed in adjusting to the equilibrium point is equal to -0.784, which means that after shock, it will be able to adjust to the long run equilibrium by 78.4%.

EXCHANGE RATE DYNAMICS AND THEIR IMPLICATIONS

This research paper explores the dynamics of exchange rate fluctuations and their far-reaching implications for the global economy. Exchange rates are pivotal in shaping trade balances, inflation, and capital flows, making them a critical factor for policymakers, multinational corporations, and investors. By examining both theoretical frameworks and empirical evidence, this study analyzes the effects of exchange rate movements on key economic variables such as inflation rates, gross domestic product (GDP), foreign direct investment (FDI), and international trade balances. The paper employs a combination of econometric modeling and historical data analysis to evaluate how these fluctuations have influenced emerging and developed economies over the past two decades. Results indicate that exchange rate volatility can lead to inflationary pressures in import-dependent economies, disrupt trade balances, and influence FDI inflows. The findings also underscore the importance of stable exchange rate policies to mitigate economic uncertainty. This study concludes with recommendations for future research, particularly regarding the influence of digital currencies and geopolitical tensions on exchange rate stability.

The Presidency of Bill Clinton after Thirty Years: A Review Article

Abstract Did Bill Clinton destroy the U.S. economy? In a recent book, Nelson Lichtenstein and Judith Stein offer a scathing new critique. In this account, Clinton not only ravaged the United States in his own time but is largely to blame for America's subsequent economic inequality, monopolistic corporations, the Great Financial Crisis, the rise of China, and the advent of Trumpism. And yet, the economic data speak well of the Clinton presidency. He fares poorly on the trade deficit and economic inequality but otherwise delivered a balanced economic boom, far better than most administrations of the past fifty years. How do we square the withering criticisms of Lichtenstein and Stein with Clinton's economic achievements? It is correct that globalization and technological change tend to hurt blue-collar workers. And because Clinton embraced these forces and sought to place the United States at their headwaters, he may, indeed, be a “fabulous failure” from Lichtenstein and Stein's perspective. But the authors, each a labor historian and advocate, willfully dismiss the benefits that the nation as a whole, including workers and their children, enjoyed under Clinton. They also ignore the financial and military crises that Clinton averted. Overall, the Clinton administration created a wealthier and more competitive economy, albeit at the expense of those workers most vulnerable and least able to change. That is, Clinton helped transform the U.S. economy, just not along the lines that Lichtenstein and Stein prefer.

The determinants of trade deficit in Afghanistan: the role of foreign aid, exchange rate and price level

The determinants of trade deficit in Afghanistan: the role of foreign aid, exchange rate and price level

Exchange rates and trade balance in West African economy and monetary union countries: does the content of the traded goods matter?

Exchange rates and trade balance in West African economy and monetary union countries: does the content of the traded goods matter?

Economic Openness and the Behaviour of Great Ratios in G20 Countries

Most of the macroeconomic models suggest that great ratios of economics should be stable in the long term. Keeping the theoretical consequences in mind, the present study investigates the order of integration of two great ratios, viz. consumption–output and investment–output ratios. The study employs both mean shift and trend shift unit root tests with a structural break to examine the stationarity property of great ratios. This article attempts to analyse the relationship between economic openness and the behaviour of great ratios. Results of the study indicate a balanced growth path for 10 out of 18 G20 countries considered in our analysis. Findings show that countries that have a deficit trade balance with surplus foreign direct investment are more likely to demonstrate a balanced growth path. The multivariate analysis shows evidence in support of the balanced growth hypothesis in 13 of the 18 G20 countries. Of the 18 countries analysed, 8 internationally open and 6 financially open countries provide support for the balanced growth path. JEL: C20, E20, O50

거시경제학의 근본적인 문제점: 항등식을 인과성으로 사용

GDP, which only measures the value of the final product, ignores the various production processes that take place in the real world before the final product is produced. In this sense, GDP is not a reflection of the real world, but rather an artificially constructed measure of a ‘fictitious economy’. A bigger problem with GDP is that the identity equation, by which GDP is expressed as the sum of consumer spending, business investment spending, government spending, and net exports, is used in a causal way. Using this identity equation, governments often implement policies that increase spending to stimulate the economy and grow the economy. However, the principle of human behavior that one must first produce in order to consume implies that production is the cause and consumption is the effect. The idea, which implies that consumption is the cause, is thus incorrect because it goes against the principle of human behavior. This idea is based on Keynes's theory. Keynes's theory, as presented in his General Theory, is a misinterpretation of Say's Law of the Market, which states that “when one product is produced, it creates a demand for another product,” as “supply creates its own demand.” Macroeconomics, which was started based on the wrong Keynes' theory, is also a theory that is far from the real world and does not explain the economic problems that are occurring in the real world, such as the financial crisis. Therefore, in order for macroeconomics to properly explain the real world, it is necessary to establish a new macroeconomics. The new macroeconomics should be based on the principles of human behavior and should include the actual production process and the activities of entrepreneurs, who play an important role in the production process. The Austrian Business Cycle Theory, which covers these aspects, can serve as the cornerstone of a new macroeconomic theory.

Exploring carbon footprints and carbon intensities of Indonesian provinces in a domestic and global context

Within Indonesia, the structure of consumption and production differs significantly across provinces. This implies that carbon footprints and intensities between provinces are also diverse. This paper calculates historical consumption- and production-based carbon emissions at the provincial level using a multi-scale input-output (IO) database for 2010, in which an environmentally extended multi-regional IO (EE MRIO) table for 34 Indonesian provinces is integrated in the global EE MRIO EXIOBASE with data for 43 countries and 5 rest of the world regions. Emissions from consumption are detailed by product and their points of origin, while emissions from production are detailed by industry and their destinations. Our results show the heterogeneity of Greenhouse Gas (GHG) emissions under both sides. The Java region is a net importer of carbon emission, while Sumatra and Kalimantan are net exporters. In the global context, the Asia Pacific region plays important role in national GHG emissions. Services product contributed 57.1% of national consumption-based GHG emissions, followed by manufacture (30.6%), and agriculture (12.3%). On the national level, 63.5% of national GHG emissions are related to household consumption. There is a high disparity across provinces in Indonesia in carbon footprints. Provincial average per capita carbon footprints vary from 2 t CO2e/capita in East Nusa Tenggara to 13.84 t CO2e/capita in East Kalimantan. Carbon intensity also varies from 0.83 kt CO2e/M Euro in Jakarta to 2.37 kt CO2e/M Euro in North Kalimantan. Agriculture and food products dominate household carbon footprints, while construction leads in government carbon footprints. Utilities and transportation services play important roles on national carbon intensities. We further correlated the Human Development Index (HDI) with per capita carbon footprints and expenditure, and find that provinces with similar GHG emissions and expenditure per capita income as Java, tend to have a lower HDI. Understanding development status and province-level characteristics is important for selecting policy strategies.

Tax shocks, firm entry, and productivity in the open economy

We examine the role of endogenous firm entry for the domestic effects and international repercussions of tax policy. We present new evidence from proxy-vector autoregressions that exogenous US tax reductions increase hourly labor productivity and firm creation domestically, and induce higher trade deficits and real depreciation with respect to the other G7 countries, with positive spillovers to foreign consumption and investment. We show that the empirical evidence is compatible with a two-country model with endogenous firm entry. The entry channel provides a strong amplification mechanism for the supply effects of tax shocks at home and leads to persistent spillovers to the foreign economies.