International Monetary Policy And Trade Imbalances: Evidence From Twenty-Four Industrialized Countries

摘要

In both Fisher (1990) and Lee and Sampson (2000) it is shown that uncoordinated international monetary policy, that is divergence in money growth rates, gives rise to arbitrarily large, long-run trade imbalances. The prediction is significant, for it offers an explanation for the observed growing trade imbalances around the world. Further, the prediction provides one more link between nominal and real variables in the long-run. The purpose of this paper is to empirically assess the long-run relationship between divergences in money growth rates and trade imbalances using cross-country analysis. The data shows a strong positive link between divergences in money growth rates and trade imbalances.