The necessity of new versions of bilateral trade balances and COVID-19: the nonlinear ARDL approach for the USA and Japan

Ismet Gocer, Serdar Ongan, Huseyin Karamelikli, Charles A. Rarick

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Abstract

This study aims to reveal the need to reformulate new forms of Bilateral Trade Balances (BTBs) for a country rather than a traditional BTB. This is because the traditional BTB ratio, based on total exports and defined as the total exports/total imports ratio, cannot classify and quantify a BTB based on its economic impact content. It fails to classify because countries also export goods already imported (denotes re-export) besides exporting their domestic goods produced within the country (denotes domestic export). It also fails to quantify because, while domestic goods undergo a value-added process within a country, re-exported goods do not. In this context, for the first time, this study attempts to reformulate/reinvestigate new forms of BTBs as production-related BTB, based on domestic export and non-production-related BTB, based on re-export for the USA with Japan. Empirical findings confirm the necessity and cruciality of the proposed methodology in this study. JEL Codes: F10, F14.

Original languageEnglish
Pages (from-to)1-28
Number of pages28
JournalForeign Trade Review
Early online date5 Nov 2023
DOIs
Publication statusE-pub ahead of print - 5 Nov 2023

Keywords

  • production-related bilateral trade balance
  • non-production-related bilateral trade balance
  • USA
  • Japan

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