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Journal of Economic Integration 1998 December;13(4) :62-643.
DOI: https://doi.org/10.11130/jei.1998.13.4.62
A re the U.S. Exports to and Import s f rom Japan Cointegrated?
Yangru Wu and 
Junxi Zhang 
Rutgers University
University of Hong Kong
Copyright ©1998 Journal of Economic Integration
ABSTRACT
The size and duration of the U.S. bilateral trade deficit with Japan has raised concern from both politicians and the general public. This paper seeks to investigate the behavior of this deficit by conducting stationarity tests on the deficit and tests for long-run relationships between U.S. exports to and imports from Japan. We show that, if an endogenously searched break is properly accounted for, exports and imports are cointegrated with a coefficient of one, and the deficit appears to be stationary. Thus, in contrast to the public's percep tion, we conclude that the U.S.-Japan trade deficit may not be "too large." (JEL Classifications: F14, C22)
 
REFERENCE
1. Wu, Yangru and Hua Zhang [1997], "Do Interest Rates Follow Unit-Root Processes? Evidence from Cross-Maturity Treasury Bill Yields," Review of Quantitative Finance and Accounting 8; pp. 69-81.
2. Hendry, D.F. and G.E. Mizon [1978], "Serial Correlation as Convenient Simplification, Not a Nuisance: A Comment on a Study of the Demand for Money by the Bank of England," Economic Journal 88; pp. 549-563.
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