Foreign Trade of Capital Goods in the United States: A Persistent Deterioration

Foreign trade of capital goods in the United States from 1994 to 2016 is specifically examined. A lagging performance of exports vis-à-vis imports in terms of magnitude, growth rate as well as price reductions has led to the current deficit. Domestic industrial output is a determining factor in the extent of foreign trade of capital goods. It exposes very large coefficients in the long term for exports (2.89), as well as for imports (4.34). Concerning the effective exchange rate, coefficients are systematically negative and elastic. Hence, a depreciation of the dollar could further deteriorate the external accounts of this sector. The United States trade deficit is expected to continue. As a whole, it is based on a mutual need: it fulfills the private interests of the incumbent parties.
Julio Goicoechea
Attached file: 
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