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The Cyclical Behavior of Net Exports: Temporary and Persistent Movements
Author(s) -
Phillips Kerk L.
Publication year - 1996
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.1996.tb00085.x
Subject(s) - economics , shock (circulatory) , consumption (sociology) , monetary economics , consumption smoothing , empirical evidence , investment (military) , international economics , balance of trade , macroeconomics , business cycle , philosophy , epistemology , sociology , politics , political science , medicine , law , social science
This paper explores the empirical relationship of net exports, domestic output, and foreign output. It presents evidence supporting a consumption‐smoothing motive for trade in goods. Classical models of the international macroeconomy typically allow for trade in claims on both home and foreign output. This paper lends empirical support to this setup by showing that highly transitory shocks to output cause net exports from the country experiencing the shock to rise. Persistent shocks have opposite effects—a result consistent with the role persistent shocks play in signaling future investment opportunities.