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The terms of trade and the response of Australia's trade balance
Economics Letters 18 (1985) 241-245 North-Holland
241
THE TERMS OF TRADE AND THE RESPONSE OF AUSTRALIA’S TRADE BALANCE B.S. FELMINGHAM University of Tasmania, Hobart, Tasmania 7001, Australia
Received 31 October 1984
The relationship between Australia’s trade balance and the terms of trade is analysed for the quarterly time series 1960.1 to 1982.W in a cross spectral comparison of the unseasonalised data series. A sufficient condition for the satisfaction of a general Marshall-Lemer condition is that the estimated gain exceeds the value one. This condition is satisfied at both long and short, coherent frequency components in contrast to earlier studies for the U.S. The estimated phase at the frequencies of interest indicate a rapid response of the trade balance to the terms of trade.
1. Introduction The Australian government’s decision to flex the currency exchange ’ is designed to reduce this small country’s dependence on capital flows which compensate for persistent trade deficits and preserve external balance. The flexible exchange system may correct trade imbalances by inducing terms of trade corrections. But the efficacy of the flexible exchange system in this context is impaired in the circumstances described by Dombusch and Krugman (1976) where the trade balance responds favourably to the terms of trade with considerable delay. A particular example is the J curve response where as a result of a deterioration of the terms of trade the trade balance worsens before it improves. This paper explores the relationship between the Australian trade balance and the terms of trade to determine if Australia’s new flexible exchange system is inhibited by a lengthy or convoluted delay of the trade balance to an exchange induced terms of trade correction.
2. Methodology and data The methods adopted in this study derive from an earlier analysis on U.S. data by McPheters and Stronge (1979) subject to the caveats entered by Mates (1982), and Haynes and Stone (1982). The analysis of McPheters and Stronge (1979) on U.S. data for the quarterly time series 1947 to 1974 is based on the cross spectral comparison of the ratio of quantities of imports to exports with the terms of trade, the ratio of export prices (p,) to import prices (pm) where both series are expressed in percent change form. The findings of this U.S. study are based on the cross spectral statistics: the gain and coherence. The gain (p) at coherent frequencies is interpreted as the sum of import and export elasticities with respect to the terms of trade. Thus, provided the estimated gain exceeds unity at a particular frequency, the Marshall-Lemer condition is met there. McPheters and Stronge find t The Australian government made the Australian exchange rate flexible on 12 December 1983. 01651765/85/$3.30
0 1985, Elsevier Science Publishers B.V. (North-Holland)
242
B.S. Felmingham / Terms of trade, Australia’s trade balance
coherent frequency components with periodicity of 7.5 to 20 quarters with estimated gains exceedi] one in each case. They infer from this evidence that a J curve exists in the U.S. case because tl Marshall-Lemer condition is not met until two years have lapsed. Mates and Haynes-Stone ha three criticisms of the study: first, it confuses frequency components with time domain lags; secon the gain provides no information about the difference between lags and leads and the Marshall-Lern condition is restrictive. It relates to a two commodity world, one in which the price of imports is tl inverse of the barter price of exports. The present study is modified to accommodate these objections. It is based on the cross spectl comparison of the oalue of the trade balance expressed as the ratio of the value of imports to t value of exports: B =p,,,M/p,X with the terms of trade ( p,/p,,,). Both series are expressed as t first difference of logarithms and the gain (/3) at each frequency (A) is defined as follows: * d log B = N log( P,/P,,, ).
(
The following proposition provides an important interpretation Proposition.
of the gain:
/I > 1 is sufficient to satisfy a general Marshall-Lerner
condition.
Proof B =p,,,M/p,X=M
I
F. X, m
log B = log M - log( p/p,,,)
- log X,
dlogB=dlogM-dlog(p,/p,)-dlogX, d log B
dlog M
_ 1_
d log( P,/P, ) = d log( P,/P, )
d log X d log( PJP,
>’
where d log B/d log( p,/p,,,) = /I from (1). d log M d log( p,/p,)
= em(r.r)
’ 0,
d log X d log( PJP,
)
= e,(,.,) < 0.
If p > 1 in (3) then e m(t.t)
-
ex(,,,) -
1> 1
:.
emCr.,)- ex(r.r) > 2.
I
The general Marshall-Lerner condition requires the sum of import and export elasticities to excc one. The proposition suggests that if the estimated gain at a particular frequency exceeds the va one, the sum of these elasticities with respect to the terms of trade exceeds two. If the gain has t property then the Marshall-Lerner condition holds and in this respect /? > 1 is a sufficient conditj for the satisfaction of the condition. However /3 > 1 is not necessary 3 and if the estimated gair * The gain at a particular for those observations accommodated. 3 If B ~1
frequency is equivalent to the coefficient in the neighbourhood if that frequency
then emC,.r) - exC,.,) -1<1, that is em(,.r)- ex(,.r)< 2.
in the regression of the terms of trade on the trade balr component once any time delay between the variable This inequality
is satisfied
for e,,,(,,,) - ex(,,,) 2 1.
B.S. Felmingham / Terms of trade, Australia’s trade balance
243
below one, no conclusion can be drawn about the Marshall-Lerner condition. Haynes and Stone (1982) point out the limitations of the gain statistic as an indicator of lags or leads, a limitation which may be accommodated by exploring the properties of phase estimates at frequencies of interest. The quarterly time series covers the period 1960.1 to 1982.IV, data sources are provided in an appendix. The most important aspect of the data is the unseasonalised form of the series for the value of imports and exports from which the series for the trade balance is constructed. Unseasonalised data are preferred for the reasons advanced by Nerlove (1964) who argues that official deseasonalisation procedures may remove more than seasonal peaks in the individual series. 4 3. Results The results ’ of the cross spectral comparison of the trade balance (B) and terms of trade ( p,/p,) in relative rate of change form are disclosed in table 1. The first three columns of table 1 provide Table 1 Results of the cross spectral comparison of Australia’s trade balance with the terms of trade: 1960.1 to 1982.N. a
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Frequency b (A)
Period ’ (quarter)
Coherence
0.157 0.314 0.471 0.628 0.785 0.942 1.099 1.256 1.413 1.571 1.727 1.884 2.041 2.198 2.355 2.512 2.669 2.826 2.983 3.140
40 20 13.33 10 8 6.67 5.72 5 4.44 4 3.63 3.33 3.07 2.86 2.67 2.5 2.35 2.22 2.10 2
0.486 0.529 0.632 0.569 0.361 0.565 0.488 0.141 0.281 0.557 0.678 0.664 0.449 0.286 0.447 0.429 0.257 0.395 0.336 0.236
Significance d coherence a=
Gain
Confidence ’ interval gain
0.20
0.702 0.775 1.100 1.146 0.699 0.949 0.732 0.194 0.380 0.798 1.081 1.183 0.765 0.486 0.686 0.688 0.437 0.648 0.474 0.301
0.49-0.92 0.54-1.01 0.79-1.41 0.69-1.51 0.51-0.89 0.69-1.21 0.51-0.95 0.08-0.30 0.23-0.53 0.57-1.02 0.75-1.41 0.81-1.55 0.54-1.00 0.32-0.66 0.54-0.88 0.57-0.89 0.34-0.56 0.51-0.84 0.29-0.59 0.17-0.41
0.20 0.05 0.10
n.s. 0.10 0.20
n.s. n.s. 0.10 0.05 0.05 n.s. ns. n.s. ns. n.s. n.s. n.s. n.s.
Phase (radians)
-
-
0.438 0.484 0.321 0.335 1.291 1.169 1.172 1.090 0.720 0.656 0.657 0.583 0.534 1.467 1.467 1.553 0.912 0.085 0.072 0
Time f difference
0.680
0.380 0.309
’ Experimentation with lag lengths M = 12, 16, 20, 24, 28 show that j = l,, . . , 20 = M provides the compromise between resolution and reliability. b Frequency at lag j is determined as follows: X = lrj/20, j = 1,. . . ,20. ’ The period of each frequency component in quarters is 40/j (2 M/j) for j = 1,. . . ,20. d The cutoff for significance tests of gain are a = 0.05 (0.590), e = 0.10 (0.530) and o = 0.20 (0.455) and significance tests are those indicated by Fishman (1969, pp. 135-138). n.s. means not significant. ’ The 95 percent confidence interval for the gain are set out by Fishman (1969, pp. 138-140). f The time difference in quarters between the two series at a particular frequency is derived by dividing phase by frequency. 4 This study is also conducted with seasonally adjusted data and the results reported in Felmingham (1984). Official seasonal adjustment procedures do not distort the data unduly and the interpretation of results does not alter markedly. 5 The individual spectral analysis of the time series for the trade balance and terms of trade are covariance stationary.
244
B.S. Felmingham / Terms of trade, Australia’s trade balance
details of the frequency in radians and period of each component at each lag j. The fourth colul reports the estimated coherence of the same frequency component in each series and the fifth colu records the level of significance for each estimated coherence. The interpretation of these cr’ spectral results focuses on the three harmonic components which exhibit an estimated cohere] significant at the five percent level (a = 0.05). These occur at lags j = 3, 11 and 12, the frequel components (3/2O)lr, (11/20)a and (3/5)n with period of 13.33, 3.63 and 3.33 quarters respective Columns (5) and (6) of table 1 disclose the various estimates of the gain and the 95 pert confidence interval for each. The seventh column records estimates of the phase in radians, whicl expressed as a time difference in quarters at the frequencies of interest in the last column. The estimated gain at the three frequencies of greatest interest (3/20)a (l.lOO), (11/20)7r (1.0 and (3/5)n (1.183) are all significantly above the value one. Thus following the argument of proposition, the Marshall-Lemer condition is satisfied at each of these frequency components. T: the Marshall-Lerner condition is satisfied on a short swing of 3 to 4 quarters and again on a lon swing of 13 to 14 quarters in the Australian case. This general conclusion makes an interest comparison with the findings of McPheters and Stronge (1979) for the U.S. where their narr definition of the Marshall-Lerner condition is satisfied on cyclical components with a minim period of two years. Further the estimated gains in column (6) of table 1 peak at lag j = 12, they not exhibit the pattern suggested by Engle (1976) and Fishman (1969) which is consistent wit distributed lag. The theoretical gain is monotonically decreasing function of frequency, if the relev time series representation of the trade balance response to terms of trade adjustments is a distribu lag with all coefficients positive. Estimates of the phase in column (7) of table 1 provides some information about the length of 1 or leads between the trade balance and the terms of trade. A notable feature of these phase estimz is the switches of sign which occur at the frequencies (3/10)a, (9/2O)lr and at (17/20)a. 1 suggests an inherent instability of Australia’s trade balance to its terms of trade, whatever the forn the response. The major piece of evidence about timing of Australia’s trade balance reaction to te: of trade is provided in the last column of table 1, where the estimated phase at the frequencie! greatest interest are interpreted as a time difference in quarters. In particular on that coherent 11 swing of 13.33 quarters Australia’s terms of trade leads the trade balance by 0.68 of one quarter on the shorter swings of 3 to 4 quarters the reaction is quicker (0.38 and 0.31 of a single quart There is no evidence of a long delay between the terms of trade adjustment and Australia’s tr balance response. In summary, this study establishes the following: a general form of Marshall-Lemer condition is satisfied if estimates of the gain at a particular frequency exceed one the Australian case the condition is satisfied in both the long and short term in the context coherent periodic components; neither the estimated gain and phase have the theoretical sh associated with a distributed lag model, in fact the time delay between Australia’s terms of trade its trade balance appears small. Appendix: Data sources
(1) The series for import and export prices ( p,,, and p,) are constructed from the indexes of iml and export prices reported in the following: Reserve Bank of Australia, Monthly Statistical Bulletin, Various issues. (2) The seasonally unadjusted series for the value of imports and exports in current prices is dr, from the following:
Monthly Summary of Statistics, Australia, Cat. no. 1304.0 (Australian Bureau of Statistics, Canbe
B.S. Felmingham / Terms
oftrade,Australia’s
trade balance
245
References Dombusch, R. and P.P. Krugman, 1976, Flexible exchange rates in the short run, Brookings Papers On Economic Activity 3, 537-575. Engle, R.F., 1976, Interpreting spectral analysis in terms of time domain models, Annals of Economic and Social Measurement 5, no. 1, 89-109. Fehningham, B.S., 1984, The potential impact of flexible exchange rates on the trade balance: An Australian analysis, Economic discussion paper 84/3 (University of Tasmania, Hobart). Fishman, G.S., 1969, Spectral methods in econometrics (Harvard University Press, Cambridge, MA). Haynes, S.E. and J.A. Stone, 1982, Impact of the terms of trade on the U.S. trade balance: A re-examination, Review of Economics and Statistics 64, 702-706. Mates, M., 1982, Impact of the terms of trade on the U.S. trade balance: A comment, Review of Economics and Statistics 64, 701-702. McPheters, L.R. and W.B. Strange, 1979, Impact of the terms of trade on the U.S. trade balance: A cross spectral analysis, Review of Economics and Statistics 61, 451-455. Nerlove, M., 1964, Spectral analysis of seasonal adjustment procedures, Econometrica 32, no. 3, 241-286.
241
THE TERMS OF TRADE AND THE RESPONSE OF AUSTRALIA’S TRADE BALANCE B.S. FELMINGHAM University of Tasmania, Hobart, Tasmania 7001, Australia
Received 31 October 1984
The relationship between Australia’s trade balance and the terms of trade is analysed for the quarterly time series 1960.1 to 1982.W in a cross spectral comparison of the unseasonalised data series. A sufficient condition for the satisfaction of a general Marshall-Lemer condition is that the estimated gain exceeds the value one. This condition is satisfied at both long and short, coherent frequency components in contrast to earlier studies for the U.S. The estimated phase at the frequencies of interest indicate a rapid response of the trade balance to the terms of trade.
1. Introduction The Australian government’s decision to flex the currency exchange ’ is designed to reduce this small country’s dependence on capital flows which compensate for persistent trade deficits and preserve external balance. The flexible exchange system may correct trade imbalances by inducing terms of trade corrections. But the efficacy of the flexible exchange system in this context is impaired in the circumstances described by Dombusch and Krugman (1976) where the trade balance responds favourably to the terms of trade with considerable delay. A particular example is the J curve response where as a result of a deterioration of the terms of trade the trade balance worsens before it improves. This paper explores the relationship between the Australian trade balance and the terms of trade to determine if Australia’s new flexible exchange system is inhibited by a lengthy or convoluted delay of the trade balance to an exchange induced terms of trade correction.
2. Methodology and data The methods adopted in this study derive from an earlier analysis on U.S. data by McPheters and Stronge (1979) subject to the caveats entered by Mates (1982), and Haynes and Stone (1982). The analysis of McPheters and Stronge (1979) on U.S. data for the quarterly time series 1947 to 1974 is based on the cross spectral comparison of the ratio of quantities of imports to exports with the terms of trade, the ratio of export prices (p,) to import prices (pm) where both series are expressed in percent change form. The findings of this U.S. study are based on the cross spectral statistics: the gain and coherence. The gain (p) at coherent frequencies is interpreted as the sum of import and export elasticities with respect to the terms of trade. Thus, provided the estimated gain exceeds unity at a particular frequency, the Marshall-Lemer condition is met there. McPheters and Stronge find t The Australian government made the Australian exchange rate flexible on 12 December 1983. 01651765/85/$3.30
0 1985, Elsevier Science Publishers B.V. (North-Holland)
242
B.S. Felmingham / Terms of trade, Australia’s trade balance
coherent frequency components with periodicity of 7.5 to 20 quarters with estimated gains exceedi] one in each case. They infer from this evidence that a J curve exists in the U.S. case because tl Marshall-Lemer condition is not met until two years have lapsed. Mates and Haynes-Stone ha three criticisms of the study: first, it confuses frequency components with time domain lags; secon the gain provides no information about the difference between lags and leads and the Marshall-Lern condition is restrictive. It relates to a two commodity world, one in which the price of imports is tl inverse of the barter price of exports. The present study is modified to accommodate these objections. It is based on the cross spectl comparison of the oalue of the trade balance expressed as the ratio of the value of imports to t value of exports: B =p,,,M/p,X with the terms of trade ( p,/p,,,). Both series are expressed as t first difference of logarithms and the gain (/3) at each frequency (A) is defined as follows: * d log B = N log( P,/P,,, ).
(
The following proposition provides an important interpretation Proposition.
of the gain:
/I > 1 is sufficient to satisfy a general Marshall-Lerner
condition.
Proof B =p,,,M/p,X=M
I
F. X, m
log B = log M - log( p/p,,,)
- log X,
dlogB=dlogM-dlog(p,/p,)-dlogX, d log B
dlog M
_ 1_
d log( P,/P, ) = d log( P,/P, )
d log X d log( PJP,
>’
where d log B/d log( p,/p,,,) = /I from (1). d log M d log( p,/p,)
= em(r.r)
’ 0,
d log X d log( PJP,
)
= e,(,.,) < 0.
If p > 1 in (3) then e m(t.t)
-
ex(,,,) -
1> 1
:.
emCr.,)- ex(r.r) > 2.
I
The general Marshall-Lerner condition requires the sum of import and export elasticities to excc one. The proposition suggests that if the estimated gain at a particular frequency exceeds the va one, the sum of these elasticities with respect to the terms of trade exceeds two. If the gain has t property then the Marshall-Lerner condition holds and in this respect /? > 1 is a sufficient conditj for the satisfaction of the condition. However /3 > 1 is not necessary 3 and if the estimated gair * The gain at a particular for those observations accommodated. 3 If B ~1
frequency is equivalent to the coefficient in the neighbourhood if that frequency
then emC,.r) - exC,.,) -1<1, that is em(,.r)- ex(,.r)< 2.
in the regression of the terms of trade on the trade balr component once any time delay between the variable This inequality
is satisfied
for e,,,(,,,) - ex(,,,) 2 1.
B.S. Felmingham / Terms of trade, Australia’s trade balance
243
below one, no conclusion can be drawn about the Marshall-Lerner condition. Haynes and Stone (1982) point out the limitations of the gain statistic as an indicator of lags or leads, a limitation which may be accommodated by exploring the properties of phase estimates at frequencies of interest. The quarterly time series covers the period 1960.1 to 1982.IV, data sources are provided in an appendix. The most important aspect of the data is the unseasonalised form of the series for the value of imports and exports from which the series for the trade balance is constructed. Unseasonalised data are preferred for the reasons advanced by Nerlove (1964) who argues that official deseasonalisation procedures may remove more than seasonal peaks in the individual series. 4 3. Results The results ’ of the cross spectral comparison of the trade balance (B) and terms of trade ( p,/p,) in relative rate of change form are disclosed in table 1. The first three columns of table 1 provide Table 1 Results of the cross spectral comparison of Australia’s trade balance with the terms of trade: 1960.1 to 1982.N. a
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Frequency b (A)
Period ’ (quarter)
Coherence
0.157 0.314 0.471 0.628 0.785 0.942 1.099 1.256 1.413 1.571 1.727 1.884 2.041 2.198 2.355 2.512 2.669 2.826 2.983 3.140
40 20 13.33 10 8 6.67 5.72 5 4.44 4 3.63 3.33 3.07 2.86 2.67 2.5 2.35 2.22 2.10 2
0.486 0.529 0.632 0.569 0.361 0.565 0.488 0.141 0.281 0.557 0.678 0.664 0.449 0.286 0.447 0.429 0.257 0.395 0.336 0.236
Significance d coherence a=
Gain
Confidence ’ interval gain
0.20
0.702 0.775 1.100 1.146 0.699 0.949 0.732 0.194 0.380 0.798 1.081 1.183 0.765 0.486 0.686 0.688 0.437 0.648 0.474 0.301
0.49-0.92 0.54-1.01 0.79-1.41 0.69-1.51 0.51-0.89 0.69-1.21 0.51-0.95 0.08-0.30 0.23-0.53 0.57-1.02 0.75-1.41 0.81-1.55 0.54-1.00 0.32-0.66 0.54-0.88 0.57-0.89 0.34-0.56 0.51-0.84 0.29-0.59 0.17-0.41
0.20 0.05 0.10
n.s. 0.10 0.20
n.s. n.s. 0.10 0.05 0.05 n.s. ns. n.s. ns. n.s. n.s. n.s. n.s.
Phase (radians)
-
-
0.438 0.484 0.321 0.335 1.291 1.169 1.172 1.090 0.720 0.656 0.657 0.583 0.534 1.467 1.467 1.553 0.912 0.085 0.072 0
Time f difference
0.680
0.380 0.309
’ Experimentation with lag lengths M = 12, 16, 20, 24, 28 show that j = l,, . . , 20 = M provides the compromise between resolution and reliability. b Frequency at lag j is determined as follows: X = lrj/20, j = 1,. . . ,20. ’ The period of each frequency component in quarters is 40/j (2 M/j) for j = 1,. . . ,20. d The cutoff for significance tests of gain are a = 0.05 (0.590), e = 0.10 (0.530) and o = 0.20 (0.455) and significance tests are those indicated by Fishman (1969, pp. 135-138). n.s. means not significant. ’ The 95 percent confidence interval for the gain are set out by Fishman (1969, pp. 138-140). f The time difference in quarters between the two series at a particular frequency is derived by dividing phase by frequency. 4 This study is also conducted with seasonally adjusted data and the results reported in Felmingham (1984). Official seasonal adjustment procedures do not distort the data unduly and the interpretation of results does not alter markedly. 5 The individual spectral analysis of the time series for the trade balance and terms of trade are covariance stationary.
244
B.S. Felmingham / Terms of trade, Australia’s trade balance
details of the frequency in radians and period of each component at each lag j. The fourth colul reports the estimated coherence of the same frequency component in each series and the fifth colu records the level of significance for each estimated coherence. The interpretation of these cr’ spectral results focuses on the three harmonic components which exhibit an estimated cohere] significant at the five percent level (a = 0.05). These occur at lags j = 3, 11 and 12, the frequel components (3/2O)lr, (11/20)a and (3/5)n with period of 13.33, 3.63 and 3.33 quarters respective Columns (5) and (6) of table 1 disclose the various estimates of the gain and the 95 pert confidence interval for each. The seventh column records estimates of the phase in radians, whicl expressed as a time difference in quarters at the frequencies of interest in the last column. The estimated gain at the three frequencies of greatest interest (3/20)a (l.lOO), (11/20)7r (1.0 and (3/5)n (1.183) are all significantly above the value one. Thus following the argument of proposition, the Marshall-Lemer condition is satisfied at each of these frequency components. T: the Marshall-Lerner condition is satisfied on a short swing of 3 to 4 quarters and again on a lon swing of 13 to 14 quarters in the Australian case. This general conclusion makes an interest comparison with the findings of McPheters and Stronge (1979) for the U.S. where their narr definition of the Marshall-Lerner condition is satisfied on cyclical components with a minim period of two years. Further the estimated gains in column (6) of table 1 peak at lag j = 12, they not exhibit the pattern suggested by Engle (1976) and Fishman (1969) which is consistent wit distributed lag. The theoretical gain is monotonically decreasing function of frequency, if the relev time series representation of the trade balance response to terms of trade adjustments is a distribu lag with all coefficients positive. Estimates of the phase in column (7) of table 1 provides some information about the length of 1 or leads between the trade balance and the terms of trade. A notable feature of these phase estimz is the switches of sign which occur at the frequencies (3/10)a, (9/2O)lr and at (17/20)a. 1 suggests an inherent instability of Australia’s trade balance to its terms of trade, whatever the forn the response. The major piece of evidence about timing of Australia’s trade balance reaction to te: of trade is provided in the last column of table 1, where the estimated phase at the frequencie! greatest interest are interpreted as a time difference in quarters. In particular on that coherent 11 swing of 13.33 quarters Australia’s terms of trade leads the trade balance by 0.68 of one quarter on the shorter swings of 3 to 4 quarters the reaction is quicker (0.38 and 0.31 of a single quart There is no evidence of a long delay between the terms of trade adjustment and Australia’s tr balance response. In summary, this study establishes the following: a general form of Marshall-Lemer condition is satisfied if estimates of the gain at a particular frequency exceed one the Australian case the condition is satisfied in both the long and short term in the context coherent periodic components; neither the estimated gain and phase have the theoretical sh associated with a distributed lag model, in fact the time delay between Australia’s terms of trade its trade balance appears small. Appendix: Data sources
(1) The series for import and export prices ( p,,, and p,) are constructed from the indexes of iml and export prices reported in the following: Reserve Bank of Australia, Monthly Statistical Bulletin, Various issues. (2) The seasonally unadjusted series for the value of imports and exports in current prices is dr, from the following:
Monthly Summary of Statistics, Australia, Cat. no. 1304.0 (Australian Bureau of Statistics, Canbe
B.S. Felmingham / Terms
oftrade,Australia’s
trade balance
245
References Dombusch, R. and P.P. Krugman, 1976, Flexible exchange rates in the short run, Brookings Papers On Economic Activity 3, 537-575. Engle, R.F., 1976, Interpreting spectral analysis in terms of time domain models, Annals of Economic and Social Measurement 5, no. 1, 89-109. Fehningham, B.S., 1984, The potential impact of flexible exchange rates on the trade balance: An Australian analysis, Economic discussion paper 84/3 (University of Tasmania, Hobart). Fishman, G.S., 1969, Spectral methods in econometrics (Harvard University Press, Cambridge, MA). Haynes, S.E. and J.A. Stone, 1982, Impact of the terms of trade on the U.S. trade balance: A re-examination, Review of Economics and Statistics 64, 702-706. Mates, M., 1982, Impact of the terms of trade on the U.S. trade balance: A comment, Review of Economics and Statistics 64, 701-702. McPheters, L.R. and W.B. Strange, 1979, Impact of the terms of trade on the U.S. trade balance: A cross spectral analysis, Review of Economics and Statistics 61, 451-455. Nerlove, M., 1964, Spectral analysis of seasonal adjustment procedures, Econometrica 32, no. 3, 241-286.