El Paso Customs District Cross-border Trade Flows

• Activity Number: 308
• Type: Contributed
• Date/Time: Wednesday, August 11, 2004 : 8:30 AM to 10:20 AM
• Sponsor: Business and Economics Statistics Section
• Author(s): Roberto Tinajero*+ and Thomas M. Fullerton, Jr. and Richard L. Sprinkle
• Companies: University of Texas, El Paso and University of Texas, El Paso and University of Texas, El Paso
• Keywords: international econometrics ; border trade flows ; transfer function ARIMA models

Abstract

An important issue in applied international economics is the extent to which trade flows adjust to changes in economic activity, relative prices, and exchange rates. While there have been numerous studies regarding merchandise trade elasticities for industrial economies such as the European Union, Japan, and the United States, relatively little empirical work has been completed with respect to analyzing international merchandise trade growth through the United States-Mexico border region. To examine whether border trade flows can be successfully modeled, short-term time series characteristics of cross-border trade flows through El Paso, Texas, are analyzed. A transfer function ARIMA econometric methodology is employed using data from January 1995 to December 2002 to model border trade flows. Empirical results indicate that economic activity in the United States and Mexico along with relative prices adjusted for exchange rate changes play important roles in determining month-to-month fluctuations in border region trade flows.