From the editor

The International Trade Journal, Vol. 32, No. 4 (September–October 2018)

Dear Readers,

Welcome to the fourth issue of The International Trade Journal (ITJ)’s thirty-second volume. Three of the four articles in this issue study exchange rates. The first looks at the long- and short-run effects of exchange rates on Malaysia’s export earnings and import payments. The second looks at the effect of oil prices on the real exchange rate between the U.S. and Canada. The third looks at how exchange rates affect Turkey’s trade balance in the long and short run. The final article presents a theoretical model of how tariffs affect intermediate inputs in a small, open economy.

The first article, by Mohsen Bahmani-Oskooee and Hanafiah Harvey, looks at how changes in the exchange rate affect export earnings and payments for imports from Malaysia’s 11 main export partners.¹ In contrast to previous studies, the authors allow appreciations and depreciations to have asymmetric short- and long-run effects on in- and out-payments. Before allowing for asymmetries, they find that exchange rates do not significantly affect export earnings or payments for inputs. After allowing for nonlinear effects, however, they find short-run effects on in- and out-payments in most cases. They find long-run effects, however, in fewer than half of these cases.

The second article, by Jing Zhao and Savannah Wei Shi, looks at whether world oil prices affect the real exchange rate between the Canadian dollar and the U.S. dollar.² They note that the United States is a net importer of petroleum products, whereas Canada is a net exporter. They find the Canadian dollar appreciates in real terms against the U.S. dollar when the world oil price increases. Moreover, they note that as Canada’s production of oil and petroleum products has increased, the world oil price has had a larger effect.

The third article, by Raif Cergibozan and Ali Ari, looks at how exchange rates have affected Turkey’s trade deficit. The authors find that devaluation improved Turkey’s trade balance in the long run under both fixed and floating exchange rate regimes. In contrast, they do not find any short-run effects and their results do not support the J-curve hypothesis.³

The final article in this issue, by Henry Thompson, looks at a tariff on an intermediate input in a small, open economy. Previous studies have often argued that countries benefit from imported intermediate inputs, suggesting that tariffs on these goods are likely to have an adverse effect.⁴ This would seem especially likely to be the case in small, open economies where tariffs do not affect international prices. In this article, Thompson presents a two-good, three-factor model where a tariff on an imported factor of production can raise both wages and income in a small, open economy. The exported good uses the imported factor intensively, while the import-competing good uses labor intensively. In this model, a tariff on the imported factor of production might reduce export production but increase wages. Further, although the tariff reduces total output, import spending might fall more than output in the presence of a third factor of production. As a result, income might also increase after a tariff is imposed.

As usual, we would like to acknowledge the people without whom the ITJ would not succeed. We would like to thank the authors for their contributions, the anonymous referees for the detailed and timely comments they provide, the team at the International Trade Institute at Texas A&M International University that ensures that submissions are processed quickly and efficiently, our Editorial Board for their expert guidance, and our publisher, Taylor and Francis, for ensuring the high quality of the ITJ.

Notes

¹ Soleymani and others (2016) look at the effect of exchange rate fluctuations on trade between China and Malaysia.

² Another recent article in the ITJ has looked at the oil industry in the Western Hemisphere. Hudgins and Lee (2016) look at oil production in Texas and Mexico.

³ Bahmani-Oskooee and Harvey (2015) look at the J-curve hypothesis for trade between Indonesia and the United States.

⁴ For example, Sharma (2014) shows that Indian firms that import intermediate inputs are more productive than similar firms that do not.