Bilateral Trade Imbalances

Bilateral Trade Imbalances
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Volume/Issue: Volume 2022 Issue 090
Publication date: May 2022
ISBN: 9798400208843
$20.00
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Topics covered in this book

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Exports and Imports , Economics- Macroeconomics , Economics / General , trade imbalances , trade wedges , gravity , estimating trade wedge , sectoral trade flow , trade model , trade-wedge asymmetry , trade cost , Trade balance , Plurilateral trade , Exports , Trade barriers , Imports , Global

Summary

If sectoral trade flows obey structural gravity, countries' bilateral trade imbalances are the result of macro trade imbalances, “triangular trade”, or pairwise asymmetric trade barriers. Using data for 40 major economies and the Rest of the World, we show that large and pervasive asymmetries in trade barriers are required to account for most of the observed variation in bilateral imbalances. A dynamic quantitative trade model suggests that eliminating these asymmetries would significantly reduce bilateral (but not macro) imbalances and have sizeable impacts on welfare. We provide evidence that the asymmetries we measure are in part related to the policy environment: trade inside the European Single Market appears to be subject to more bilaterally symmetric frictions. Extending the same symmetry to all parts of the global economy would give a large boost to the real incomes of several non-E.U. countries.