The bilateral USA-Mexico trade balances under decomposed export data

Tools

Ongan, Serdar and Karamelikli, Huseyin and Doyran, Mine Aysen and Gocer, Ismet and Rarick, Charles A. and Mellon, John (2023) The bilateral USA-Mexico trade balances under decomposed export data. Journal of Industry, Competition and Trade, 23 (3-4). pp. 171-186. ISSN 1566-1679 (https://doi.org/10.1007/s10842-023-00401-6)

[thumbnail of Ongan-etal-JICT-2023-The-bilateral-USA-Mexico-trade-balances-under-decomposed-export-data]
Preview
 Text. Filename: Ongan-etal-JICT-2023-The-bilateral-USA-Mexico-trade-balances-under-decomposed-export-data.pdf
Accepted Author Manuscript
License: Strathprints license 1.0
Download (862kB)| Preview

Abstract

This study re-formulates and re-examines the traditional bilateral trade balance (TB) concept (ratio) in the USA-Mexico case using a different methodology. This re-examination is constructed on newly formulated decomposed-export-based TBs—namely, domestic-export-based TB and re-export-based TB. Since the undecomposed traditional total-export-based TB is expressed as a total export/import ratio, it may misrepresent the actual nature of bilateral trade of this country with Mexico because the USA also considerably re-exports to Mexico. The main empirical finding confirms the need for using decomposed-export-based TBs in trade models for the USA since the impacts of exchange rate and income on undecomposed and decomposed export-based TBs of the USA are entirely different. For example, while depreciation in the USD improves the re-export-based TB for only 13 commodities, the same change in the USD improves the domestic-export-based TB for 18. Some empirical inferences from findings are as follows: (i) Mexican consumers (MC) with a stronger Peso purchase US domestically produced commodities more than re-exported ones; (ii) MC with a weaker Peso stop purchasing US re-exported commodities more than the US domestically produced ones; (iii) MC are appreciated/depreciated-Peso-sensitive to US domestically produced commodities more than re-exported ones.

CORE (COnnecting REpositories)