- This paper analyzes macroeconomic variables to determine their effect on the United States’ trade balance. Data on GDP, exchange rates, money supply and the trade balance are adjusted for inflations to get inflation-adjusted variables. This will lead to a regression with the goal of determining which factors explain the variability of the trade balance. Four specific conclusions came from the regression, the first being that real GDP is the most significant variable in determining the movement of the United States’ trade balance. The second conclusions is that the exchange rate has no statistical relationship with the United States trade balance. The third conclusion is that the U.S. real money supply has no statistical relationship with the trade balance. The fourth and final conclusion is that time effects that are based on changes in trade policies had no effect on the U.S. trade balance outside of the variables affected in my model.
- Key Words: Trade balance, Gross Domestic Product (GDP), inflation, price index, exchange rates, exports, imports, tariffs, money supply