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1 An offcal rprn of BILAERAL RADE ELASICIIES: DE VERSUS HER RADE PARERS by Abdulnar Ham-J and Manuchhr Irandou from h Dcmbr 005 u of h AMERICA REVIEW OF POLIICAL ECOOMY (volum 3 numbr ) Copyrgh 005 Amrcan Rvw of Polcal Economy. All Rgh Rrvd.

2 38 Blaral rad Elac : Swdn Vru Hr Major radng Parnr * Abdulnar Ham-J Manuchhr Irandou Unvry of Skövd Unvry of Örbro ABSRAC h udy xplor h long-run blaral rad lac bwn Swdn and x major radng parnr for h prod for un roo and congraon n a panl prpcv ar conducd. h mad cro conal rad lac how ha rad hghly nv o chang n ncom bu l nv o ral xchang ra flucuaon. h blaral rad lac dclo ha h Marhall- Lrnr condon no afd (xcp for Grmany) and ral dprcaon of h Swdh currncy ha l favorabl mpac on h rad balanc. h polcy mplcaon of our fndng ar alo dcud. JEL clafcaon cod: F4; F43; C Ky word: blaral ncom lacy; blaral prc lacy; h Marhall-Lrnr condon; panl un roo; panl congraon. IRODUCIO h dvlopmn of rad prc and rad flow mporan for h prformanc of mall opn conom. h bcau chang n h prc of radd good affc h rm of rad and hrby h rad balanc. Furhrmor h rad lac on a blaral and long-run ba ar rlvan o dgnng rad polc and udyng nrnaonal lnkag. Anohr mplcaon of blaral rad lac r on h z of mpor and xpor dmand lac and whhr hr abolu valu add up o mor han uny a condon known a h Marhall-Lrnr (M-L hncforh) condon n h nrnaonal rad lraur. If h ca a dprcaon of a hom counry currncy rul n an mprovmn n h counry xrnal rad balanc. Alhough h lac alo play an mporan rol n prdcng how h drcon of nrnaonal rad rpond o chang n ncom and rlav prc hy hav rcvd vry ll anon n h mprcal lraur. In addon o bng can and oudad h mprcal vdnc on rad lac r on non-aonary and * W would lk o hank Pr Pdron for gnrouly provdng h program procdur ha could aly b modfd o mak h maon of h udy rgardng for panl un roo and panl congraon. Valuabl commn of on anonymou rfr ar alo graly apprcad. Of cour w alon rman rponbl for any rror. Amrcan Rvw of Polcal Economy Vol. 3 o. (Pag 38-50) Dcmbr Amrcan Rvw of Polcal Economy

3 Ham-J and Irandou: Blaral rad Elac 39 aggrgad daa. Exampl ar Krnn (967) Houhakkr and Mag (969) Khan (974) and Marquz (990). All h ud uffr no only from h aggrgaon ba (h xcpon Marquz who ma h rad lac on a blaral ba) bu alo from h purou rgron problm. h applcaon of convnonal conomrc chnqu o non-aonary (ngrad) m r can gv r o mladng rul and rronou nfrnc. h udy amp o ma h long-run blaral rad lac bwn Swdn v-à-v x of larg radng parnr (Dnmark Franc Grmany orway h UK and h US) and for h prod h raon for h choc of h prod avalably of h daa ud n h udy. h mhodology ud hr h aympoc hory of panl congraon dvlopd by Pdron ( ). h udy h fr amp o h Swdh blaral rad lac ung panl un roo and panl congraon chnqu. On of h major advanag of ung a panl congraon a gnfcan ncra n powr whn h cro-conal dmnon of h panl xpandd a compard o h wll-known low powr of andard congraon for mall ampl. Furhrmor h panl modl allow for raghforward panl of modl pcfcaon. h organzaon of h papr a follow: Scon nroduc h mprcal pcfcaon. h mad rul ar prnd and nrprd n Scon 3. Scon 4 offr concluon and polcy mplcaon. h mhodology for panl un roo and panl congraon dcrbd n h Appndx.. EMPIRICAL SPECIFICAIOS Followng h uual pracc n h appld lraur on h blaral mpor and dmand funcon w dfn h ubqun long-run pcfcaon n log-lnar and panl form a: ln IMP α + β ln Y + δ ln EXR + for L and L () ln EXP ' ' L ' ' α + β ln Y + δ ln EXR + for L and () whr IMP h Swdh ral mpor from counry (Dnmark Franc Grmany orway h UK and h US); Y h Swdh ral ncom; EXR ral blaral xchang ra bwn Swdn and counry dfnd a h numbr of SEK pr forgn currncy ; EXP h Swdh xpor o counry (counry mpor from Swdn); Y h counry ral ncom. (S Appndx for h dfnon and ourc of h daa). h dmnon of h panl and gnf h m r dmnon. In quaon () f ral dprcaon o rduc h Swdh mpor On xcpon Bahman-Okoo and Brook (999) who hav mad h rad lac on a blaral ba by applyng Johann congraon mhod o h US daa.

4 40 Amrcan Rvw of Polcal Economy xpcd ha h ma of δ ngav and f an ncra n h Swdh ncom lad o an ncra n h Swdh mpor h ma of β hould b pov. In quaon () f ral dprcaon of h SEK.. an ncra n xchang ra o ' promo h Swdh compvn and hu hr xpor h ma of δ hould ' b pov. Fnally f h ncom lacy of β pov h mpl a r n h Swdh xpor o a gvn counry du o h counry conomc growh. h quon of whhr hr a long-run abl rlaon bwn hr varabl n h panl dfnd by quaon () and () could b xamnd by panl congraon analy. On of h major advanag of ung a panl congraon a gnfcan ncra n powr whn h cro-conal dmnon of h panl xpandd a compard o h wll-known low powr of andard congraon for mall ampl. h panl modl alo allow for raghforward panl of modl pcfcaon. In ordr o f h varabl ar congrad n a panl prpcv (.. f hr x any long-run conncon bwn h varabl n h panl) w fr for h ngraon ordr of ach varabl n h panl. A varabl condrd o ngra o ordr d dnod I(d) f mu b dffrncd d m o aan aonary. For h purpo w wll mak u of h provdd by Lvn and Ln (993) Lvn. al (00) and Im. al (003). If h varabl appar o b ngrad w wll ulz vral ac nroducd by Pdron (995; 997; 999). h mhod allow dffrn ndvdual ffc acro or cro-conal nrdpndncy and ak no accoun h off-dagonal rm n h rdual long-run covaranc and h ffc of purou rgron n h hrognou panl. Pdron argu dffrn yp of ar appropra for ng h null of congraon n panl modl wh hrognou dynamc fxd ffc and hrognou congrang lop of coffcn ESIMAIO RESULS h mhod confrrd prvouly con of wo p. h fr p o h varabl for aonary by applyng panl un roo. From abl w can conclud ha ach varabl for ach counry n h panl ngrad of h fr ordr; I(). All hr for panl un roo gv h am rul. hu of paramoun mporanc o for congraon n h ca bcau f h varabl do no congra hr no any long-run rlaonhp bwn hm and any mad rul bad on h varabl n h lvl form wll b purou. Snc h varabl ar found o b non-aonary of h fr ordr w nvga whhr h varabl n ach modl ablh any congrang long-run rlaonhp. Bad on Pdron for panl congraon prnd n abl w fnd rong mprcal vdnc for panl congraon for h xpor funcon bcau all four rjc h null W u h ral blaral xchang ra a a maur of rlav prc nc mpor and xpor prc on a blaral ba ar no avalabl. h ral xchang ra alo ud by ohr auhor a a maur of rlav prc (.g. Dornbuch 980; Bahman-Okoo and Brook 999). 3 For mor dal on h mhod Appndx.

5 Ham-J and Irandou: Blaral rad Elac 4 hypoh of no panl congraon a h on prcn gnfcanc lvl. h vdnc for panl congraon howvr l rong for h mpor funcon. On rjc h null of no panl congraon a h on prcn gnfcanc lvl bu h ohr hr rjc h null only a h n prcn gnfcanc lvl. I hould b mnond howvr ha h mad valu for ach ac vry clo o crcal valu a h fv prcn gnfcanc lvl. hu w condr h mpor funcon o b a congrad panl. h mad blaral lac for ach funcon whch ar mad by ulzng h dummy la quar mhod ar prnd n abl 3. W can ha h xpor funcon vry forgn ncom lac nc h blaral ncom lac ar hghr han on for all counr n h ampl. h blaral prc lac ar howvr much lowr bu hy all ar of h xpcd gn. h mpor funcon a wll m o b vry lac for h domc ncom. h blaral prc lac ar of h xpcd gn xcp for Franc. h lac ar of lowr z (on xcpon h ca of Grmany whch clo o on n abolu rm). h um of blaral prc lac of xpor and mpor for ach counry do no add up o mor han on n abolu rm xcp for Grmany. oc ha h Frnch ca no condrd nc h mpor lacy no of h xpcd gn. Howvr w can conclud ha h M-L condon no fulflld xcp for Grmany. 4. COCLUSIOS AD POLICY IMPLICAIOS h udy appl h nw dvlopmn n h fld of panl congraon analy o nvga h long-run blaral rad lac bwn Swdn and hr x major radng parnr for h prod Svral for panl un roo and panl congraon ar conducd. h rul how ha ach varabl characrzd by on panl un roo. Howvr h for panl congraon how ha boh xpor and mpor funcon can b condrd a congrad panl ym. h mad long-run lac rval ha h xpor funcon vry forgn ncom lac bu l-prc lac. h am rul hold for h mpor funcon. h Swdh mpor funcon vry lac o domc ncom lvl bu l lac o rm of rad n ral rm xcp for Grmany. Wha ar h polcy mplcaon of our fndng? h lacy approach condr h ral xchang ra and ffc on h dmand and upply of radd good a h ky facor whl h aborpon-approach ar ha oal xpndur h mo crcal facor for undrandng and corrcng mpor and xpor funcon. h dynamc of h rad balanc ar xpland by agn rpon o ranory and prmann hock n parcular hock n producvy. Wha do congraon or lack of congraon bwn ral rad flow and ral xchang ra or ral ncom ll u abou h a of h conomy? hory ar ha congraon o b xpcd undr h manand hypoh ha h conomy workng proprly. In a wll-funconng conomy whou prmann on-dd producvy hock congraon o b xpcd. h mpl ha h lack of

6 4 Amrcan Rvw of Polcal Economy congraon h oucom of dord mark fundamnal polcy problm and h xnc of prmann chnologcal hock o h domc conomy. Howvr our rul offr hr polcy mplcaon. Fr our fndng of congraon bwn h varabl ndca hor-run mbalanc ar mporary and ar uanabl n h long run. Scond macroconomc polc (uch a monary polc) n Swdn hav bn l ffcv. hrd h um of prc lac ar l han on n abolu rm xcp for Grmany. h mpl h Marhal-Lrnr condon no fulflld xcp for Grmany. hu blaral dvaluaon ar no lkly o mprov Swdh rad balanc xcp for h blaral rad wh Grmany.

7 Ham-J and Irandou: Blaral rad Elac 43 APPEDIX Daa Dfnon and Sourc All varabl ar yarly ovr prod and oband from h followng ourc: (a) aonal Board of rad Sockholm. (b) Inrnaonal Fnancal Sac varou u. Varabl: IMP h Swdh ral mpor from counry (Dnmark Franc Grmany orway h UK and h US): nomnal mpor valu from ourc (a) dflad by h Swdh mpor prc ndx from ourc (b). EXP h Swdh ral xpor o counry : nomnal xpor valu from ourc (a) dflad by h Swdh xpor prc ndx from ourc (b). Y Ral GDP n Swdn whch n ndx form o mak un fr (ourc b). Y Ral GDP n counry whch n ndx form o mak un fr (ourc b). EXR Ral blaral xchang ra bwn Swdn and counry. I dfnd a (P E /P ) whr P counry GDP dflaor (ourc b); E h nomnal blaral xchang ra dfnd a h numbr of SEK pr currncy (ourc b); and P h Swdh GDP dflaor (ourc b).

8 44 Amrcan Rvw of Polcal Economy APPEDIX Panl Un Roo and Panl Congraon I wll known n h lraur ha h daa gnrang proc for many conomc varabl ar characrzd by ochac rnd ha mgh rul n purou nfrnc f h m r propr ar no carfully nvgad. On of h wll-known ac for h purpo h augmnd Dcky-Fullr un-roo. h n mpl form h followng: x γ + v (A) 4 x whch undr h null hypoh of no un roo.. γ quvaln o h followng: x v. (A) On h ohr hand Shllr and Prron (985) found ha h powr of Dcky-Fullr un-roo vry low n mall ampl z. o ncra h powr of h Lvn and Ln (993) and Im Paran and Shn (003) (IPS hrafr) uggd panl vron of h. A panl vron of h Dcky-Fullr un-roo h followng: x x M x γ x γ x M γ x v + v M v (A3) whr gnf h numbr of cro-con. h rror rm ar aumd o b wh no proc. h null hypoh of panl un roo γ for all. h panl un roo ha Lvn and Ln (993) (LL) uggd bad on h followng rgron: 5 x γ x + v for L and. (A4) L h panl maor can b dfnd a h followng accordng o h auhor: 4 oc ha x a calar varabl. 5 I hould b pond ou ha pobl o add ndvdual conan and rnd rm n quaon (A3).

9 Ham-J and Irandou: Blaral rad Elac 45 x v ( γ ) ). (A5) x h followng -ac can b ud o for h null hypoh of panl un roo: γ ) ( γ ) x v. (A6) h alrnav hypoh n h LL γ γ < for all. h Mon Carlo mulaon conducd by Lvn. al (00) how ha h powr of h panl-bad un roo much hghr compard o ndvdual un roo. h IPS allow for a hrognou coffcn of un roo and hy ugg an avrag of h ndvdual Dcky-Fullr. hr whch ha br z propr dfnd blow: (A7) hr h ndvdual -ac for ng H 0 : γ. h alrnav hypoh n h IPS γ < for all. ha allow for hrogny n h panl. Mon Carlo mulaon conducd by Karlon and Löhgrn (000) how h br prformanc of h IPS rgardng powr propr. Prformng un roo n a panl prpcv mporan n ordr o avod purou rgron n panl daa. If h varabl conan un roo a naural nx p o for congraon. Pdron (995; 997; 999) ugg h followng ac o for panl congraon:. Panl -Sac (on-paramrc): Z / ( ê ê λ ) σ ~ L ê L (A8) 6 6 oc h rprn h rror rm n h panl quaon ha d for panl congraon. S quaon () and ().

10 Amrcan Rvw of Polcal Economy 46. Panl -Sac (Paramrc): L L Z * * / * * * ~ (A9) 3. Group -Sac (on-paramrc): ( ) / / / ê ê ê Z ~ λ σ (A0) 4. Group -Sac (Paramrc): Z * * / * * / * / ~ ~ (A) whr + + k k µ µ λ (A) ŝ µ λ σ + (A3) L ~ σ σ * * µ (A4) and k k L η η η. (A5) h rdual rm ud o ma h abov xpron ar calculad by runnng h followng rgron: µ γ + (A6) *. K k k k µ γ γ + + (A7) and M m m m x b y +η. (A8)

11 Ham-J and Irandou: Blaral rad Elac 47 Pdron provd om adjumn for ach of all ac (boh for panl un roo and panl congraon ) dcrbd abov ha rul n andard normal drbuon. In h udy w rpor h adjud valu o ha n all ca h rpord valu hould b compard o h (0) drbuon. h ru for boh h congraon and un roo. 7 abl. Rul for Panl Un Roo H 0 : I() H : I(0) H 0 : I() H : I() LL LL IPS LL LL IPS ln IMP ln IMP -8.5 a a -.0 a ln EXP ln EXP a a -.06 a ln Y ln Y -5.0 a a a ln EXR ln EXR -8.8 a -8.6 a -.3 a lny lny a -6. a -8. a o: LL and LL ar h uggd by Lvn and Ln (993). h fr augmn h rgron unl auocorrlaon rmovd. h cond ak no accoun h ffc of ponal auocorrlaon whn h paramr ar mad. IPS h uggd by Im. al (003). a gnf ha h null hypoh can b rjcd a % gnfcanc lvl. h adjud rul ar prnd hr whch can b compard o h (0) drbuon. oc ha ach on dd (o h lf d of h drbuon). abl. Panl Congraon Rul for Impor and Expor Funcon Bad on Pdron Expor Funcon Impor Funcon o: oc ha Panl -Sac (on-paramrc) Panl -Sac (Paramrc) 3 Group -Sac (on-paramrc) and 4 Group -Sac (Paramrc) a dcrbd n h man x. Onc agan ung Pdron procdur w prn h adjud valu hr ha can b compard o h (0). Snc h 7 For mor dal Pdron (999). h mhod ar alo prnd n Balag (00).

12 48 Amrcan Rvw of Polcal Economy ar on dd h % crcal valu.96 h 5% valu.64 and h 0% crcal valu.8. abl 3. h Long-Run Blaral rad Elac Expor Funcon Impor Funcon REX Y REX Y Dnmark Franc Grmany orway UK US Swdn.4

13 Ham-J and Irandou: Blaral rad Elac 49 REFERECES Bahman-Okoo M. and Brook. J. (999) Congraon Approach o Emang Blaral rad Elac bwn U.S. and Hr radng Parnr Inrnaonal Economc Journal 3 (4): 9-8. Balag B. H. (00) Economrc Analy of Panl Daa nd Edon (W Sux England: John Wly & Son). Dornbuch R. (980) Opn Economy Macroconomc (w York: Bac Book). Houhakkr H. S. and Mag S. (969) Incom and Prc Elac n World rad h Rvw of Economc and Sac May: -5. Im K.L. Paran M.H. and Shn Y. (003) ng for Un Roo n Hrognou Panl Journal of Economrc 5 () Karlon S. and Löhgrn M. (000) On h Powr and Inrpraon n of Panl Un roo Economc Lr 66: Khan M. (974) Impor and Expor Dmand n Dvlopng Counr IMF Saff Papr Spmbr: Krnn M. E. (967) Prc Elac n h Inrnaonal rad h Rvw of Economc and Sac ovmbr: Lvn A. and Ln C.F. (993) Un Roo n Panl daa: w Rul Dparmn of Economc Unvry of Calforna a San Dgo Dcuon Papr o Lvn A. Ln C.F. and Chu C.J. (00) Un Roo n Panl daa: Aympoc and Fn-Sampl Propr Journal of Economrc 08: -4. Marquz J. (990) Blaral rad Elac h Rvw of Economc and Sac Fbruary: Pdron P. (995) Panl Congraon Aympoc and Fn Sampl Propr of Poold m-sr wh an Applcaon o h PPP Hypoh Indana Unvry Workng Papr n Economc o Jun. Pdron P. (997) Panl Congraon Aympoc and Fn Sampl Propr of Poold m-sr wh an Applcaon o h PPP Hypoh: w Rul Indana Unvry Workng Papr n Economc ovmbr. Pdron P. (999) Crcal Valu for Congrang n Hrognou Panl wh Mulpl Rgror Oxford Bulln of Economc and Sac 6(S): Shllr R. and Prron P. (985) ng h Random Walk Hypoh: Powr vru Frquncy of Obrvaon Economc Lr 8: -8. Dparmn of Economc Unvry of Skövd P.O. Box 408 SE-54 8 Skövd Swdn l: Fax: +46 (0) E-mal: abdulnar.ham-j@h.

14 50 Amrcan Rvw of Polcal Economy Dparmn of Economc Unvry of Örbro SE-70 8 Örbro Swdn l: Fax: E-mal: manuchhr.randou@.oru.

15 5 PUBLIC OPIIOS OF HE IMPEACHME OF PRESIDE WILLIAM JEFFERSO CLIO: A LOOK BACK Carl E. Enomoo ancy Bakr w Mxco Sa Unvry w Mxco Sa Unvry ABSRAC h purpo of h papr o drmn how gndr pary afflaon polcal vw ag rac ducaon ncom andanc a rlgou rvc and ohr uch varabl affcd publc opnon of Prdn Clnon horly afr h rla of h Sarr rpor (and bfor h mpachmn vo n h Hou of Rprnav). Ung daa from a CBS EWS / EW YORK IMES poll akn from Spmbr o Spmbr h udy found h followng: ) Ag had an ffc on opnon concrnng h Clnon candal wh youngr ndvdual mor lkly o wan h mpachmn proc o bgn. h nformaon provd om uppor for h Lf-xprnc hypoh. ) Womn wr mor lkly o wan Clnon o rgn and l lkly o wan mpachmn whch prhap conn wh h rong uppor Clnon had from womn vor n h 996 lcon. 3) ho wh mor ducaon and ncom wr mor lkly o wan Clnon o rgn and l lkly o wan mpachmn whch conn wh h rourc hypoh. 4) h combnaon of all arbu and ndvdual characrc drmn how fnal opnon ar ablhd concrnng rgnaon mpachmn and droppng h mar. JEL Clafcaon Cod: D7 Ky word: Publc Opnon; mpachmn; Prdn Wllam Jffron Clnon. IRODUCIO On January Prdn Wllam Jffron Clnon fd n h Paula Jon ral and dnd havng xual rlaon wh a Wh Hou nrn Monca Lwnky. On Augu 7 of h am yar h prdn agan fd h m bfor Knnh Sarr' grand jury. ha ngh Prdn Clnon addrd h naon and ad ha h had bn nvolvd n an nappropra affar. On Spmbr 998 Knnh Sarr and h Offc of h Indpndn Councl ubmd a 455-pag rpor o h Hou Judcary Comm oulnng lvn mpachabl offn ha h prdn wa bng accud of. h Judcary Comm whch cond of wny-on Rpublcan and xn Dmocra rducd and rvd h o four allgaon ha wr hn vod on: arcl on "allg ha on Aug Wllam Jffron Clnon wllfully provdd prjurou fal and mladng mony bfor Indpndn Counl Knnh Sarr' grand jury"; arcl wo "allg ha h prdn wllfully provdd prjurou fal and mladng Amrcan Rvw of Polcal Economy Vol. 3 o. (Pag 5-7) Dcmbr Amrcan Rvw of Polcal Economy