Short‐ and long‐run effects of changes in exchange rates on United States imports of paper from Finland and Sweden

Abstract

United States imports of paper from Finland and Sweden were examined, to determine to what extent they were affected by changes in the values of the two countries’ currencies with respect to the U.S. dollar, and relative to each other. A time‐series model was proposed to represent the dynamic relationship between quantities traded and exchange rates. The model led to short‐ and long‐run measures of feedback that were tested with monthly data on United States imports of newsprint, printing and writing paper, and mechanical paper, from Finland and Sweden, for the period January 1978 to February 1988. The results showed no evidence of a long‐run relationship between the exchange rates and the amounts imported, regardless of the commodity and country of origin. However, the hypothesis that the exchange rates had no significant short‐run effects was rejected in the case of exports of newsprint from Finland and Sweden, and of mechanical paper from Sweden. A devaluation of the Swedish crown or of the Finnish mark tended to increase U.S. imports, in the short run. A devaluation of the mark relative to the crown also tended to increase temporarily the Finnish share of U.S. imports of newsprint, relative to Sweden, but the effect did not persist.

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