Bilateral Trade Imbalances

May 13, 2022

Preview Citation

Format: Chicago

Alejandro Cuñat, and Robert Zymek. Bilateral Trade Imbalances, (USA: International Monetary Fund, 2022) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Subject: Exports, Imports, International trade, Plurilateral trade, Trade balance, Trade barriers

Keywords: Estimating trade wedge, Exports, Global, Gravity, Imports, Plurilateral trade, Sectoral trade flow, Trade balance, Trade barriers, Trade cost, Trade imbalances, Trade model, Trade wedges, Trade-wedge asymmetry

Publication Details

Pages:

83
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/090
Stock No:

WPIEA2022090
ISBN:

9798400208843
ISSN:

1018-5941

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