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Open Economies Review

, Volume 22, Issue 1, pp 53–91 | Cite as

How Sensitive is U.S.-Canadian Trade to the Exchange Rate: Evidence from Industry Data

  • Mohsen Bahmani-OskooeeEmail author
  • Marzieh Bolhasani
Research Article

Abstract

Previous research has followed four distinct paths to investigate the impact of currency depreciation on the trade balance of a country, using mostly aggregate trade data. In this paper we choose one of those paths and consider the trade between the U.S. and Canada. However, unlike previous research we disaggregate the trade data between the two countries by commodity and consider 152 industries that trade. After estimating inpayment and outpayment schedules for all 152 industries, we find that real depreciation has short-run effects on inpayments of 72 and outpayments of 53 industries. However, the short-run effects translate into the long-run effects only in 43 of inpayment models and 36 of outpayment models. Further analysis reveals that 1% real depreciation of the U.S. dollar has 1.29% positive effects on the U.S. net export earnings.

Keywords

U.S. Canada Industry data Trade flows Cointegration 

JEL Classification

F31 

Notes

Acknowledgement

Authors would like to thank valuable comments of an anonymous referee without implicating her/him.

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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Center for Research on International Economics and the Department of EconomicsUniversity of Wisconsin-MilwaukeeMilwaukeeUSA
  2. 2.Department of EconomicsUniversity of Wisconsin-SheboyganSheboyganUSA

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