Bilateral Trade in the Asia‐Pacific: A Case Study for Australia, USA, Japan and Singapore

Abstract

This analysis of bilateral trade involves four Asia‐Pacific nations (USA, Japan, Singapore and Australia) on a quarterly data set 1977 to 1994. The reduced‐form model applied here derives from a structure which accommodates income, real exchange rate and real‐balance effects. We find that bilateral balances between these countries are not cointegrated with some potential determinants, in particular real exchange rates. In the short run, appropriately defined, we find that Singapore’s trade with the USA and Japan is influenced by real exchange rates; Australian‐Japanese and Australian‐US trade is influenced by real income and real‐cash‐balance effects but not real exchange rates while USA‐Japanese bilateral trade is influenced only by real‐cash‐balance effects. The general conclusion is that real exchange rates have only limited effects on these selected Asia‐Pacific bilateral trading patterns, while real‐balance and income effects have a greater impact over the short run.

Dynamic Perspective of Trade Balance: Evidence from Southeast Asia before the Global Financial Crisis of 2008

“…This situation results in a deterioration of trade balance in the short term. However, as time goes by, the increased price of imports brings the quantity of domestic import demand down and due to the price elasticity of domestic exports is larger in the long run than in the short run, the volume and value of domestic exports rises sufficiently to improve the trade balance so that the effect of the depreciation is cumulatively positive (Rose & Yellen, 1989;Tongzon & Felmingham, 1998;Wilson & Tat, 2001). The above condition considers the role of time path in the relationship between the real exchange rate and trade balance.…”

“…This paper adopts a trade balance model that relies on a standard two-country model as applied by Rose and Yellen (1989), and Rose (1991). Significantly, this paper also follows the work of Tongzon and Felmingham (1998) which incorporates a real cash balance variable in determining bilateral trade flows. The following specification will clarify these points.…”

“…A home country's real cash balance (h), in following Bahmani-Oskooee (1985) and Tongzon and Felmingham (1998), is obtained by adding the currency outside of the banks (IFS, 14a) and commercial banks reserves (IFS, 20), deflated by the country's CPI (IFS, 64). An equivalent procedure (as shown by h) is used to generate the foreign country's real cash balance (h*) based on their respective data.…”

Three essays on international trade

“…The bilateral trade balance model used is developed on the idea of Rose and Yellen (1989), Rose (1991) and Tongzon and Felmingham (1998). This paper adopts a trade balance model that relies on a standard two-country model as applied by the first two papers.…”

“…The objective of this paper is to analyze the role of real exchange rates, real income and real cash balance on the bilateral trade balance among selected ASEAN countrie s (Indonesia, Malaysia, the Philippines, Singapore, Thailand) and between those ASEAN countries and the US and Japan, due to their position as the major ASEAN's trading partners and two major economies in the world. As regarded by Tongzon and Felmingham (1998), study in bilateral trade provides a deeper insight in highlighting particular issues related to trade activity between countries, which usually are not addressed in studies of aggregate trade. Bilateral trade flows tend to respond differently to the factors (e.g.…”