Effective Trade Costs and the Current Account: An Empirical Analysis
IMF Working Papers, January 15, 2019
Source details
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- Effective Trade Costs and the Current Account: An Empirical Analysis
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Bibliographic details
- Authors: Emine Boz, Nan Li, Hongrui Zhang
- Published: January 15, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484392171.001
Research question and motivation
- Investigates whether the height of trade costs in prime export sectors strongly affects current account balances.
- Hypothesis examined: countries specializing in sectors with relatively high trade costs (e.g., services) tend to run current account deficits, while those specializing in low trade cost sectors (e.g., manufacturing) tend to run current account surpluses.
Data and methodology
- Sample period: 1970–2014.
- Approach:
- Infer comparative advantages and trade costs by sector within a large sample of countries.
- Construct effective trade costs defined as trade costs weighted by sectoral comparative advantage to measure a country’s overall trade costs.
Key findings
- Higher effective exporting costs are associated with lower current account balances.
- The quantitative impact of higher effective exporting costs on current account balances is limited.
- Effective costs of importing often have no statistically significant effect.
Subjects and keywords
- Subjects: Comparative advantage, Exports, Imports, International trade, Tariffs, Taxes, Trade balance.
- Keywords: capital cost, comparative advantage, cost measure, current account, effects of trade cost, export capability, export cost, Exports, Global, global imbalances, Imports, information cost, input cost, nondiscriminatory import cost, simple average, structural gravity model, Tariffs, Trade balance, trade cost, trade costs, trade restrictiveness, trade share, transportation cost, WP.
Content in this bundle
- Effective Trade Costs and the Current Account: An Empirical Analysis, WP/19/8, January 2019