United States Trade Balance Announcements: The Nature of its Data Revisions
| Published date | 01 August 1997 |
| Date | 01 August 1997 |
| Author | Sucharita Ghosh |
| DOI | http://doi.org/10.1111/1468-0084.00071 |
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 59, 3 (1997)
0305-9049
UNITED STATES TRADE BALANCE
ANNOUNCEMENTS: THE NATURE OF
ITS DATA REVISIONS
Sucharita Ghosh*
I. INTRODUCTION
The United States merchandise trade balance went from a deficit of $25.5
billion in 1980 to a deficit of $159.6 billion in 1987 (Economic Report of
the President, 1996). This rapid increase in the US trade balance deficit
over the 1980’s led to a growing interest in studies on the impact of the
monthly Commerce Department’s US trade balance announcement on
asset prices. This interest stemmed from the hypothesis that news (for e.g.
monthly US trade balance announcements) pertinent to an asset’s price
determination causes market participants to modify their behaviour
resulting in an immediate change in the price of the asset under
consideration.
The impact of the United States monthly trade balance announcements
on various asset prices have been investigated in several studies. For
example, Hardouvelis (1988), Deravi, Gregorowicz and Hegchi (1988),
Irwin (1989), Hogan, Melvin and Roberts (1991) and Puffer (1995)
studied the impact of trade balance announcements on the exchange rate.
Aggarwal and Schirm (1992) examined the impact of trade balance
announcements on equities, currencies, long- and short-term debt instru-
ments and futures, while Madura and Tucker (1992) studied the effects
on the currency option implied standard deviation (ISDs). Looking
specifically at the US and Japan bilateral trade balance announcements,
Pruitt and Wei (1991; 1992) examined their effect on the US stock
market and in the Japanese yen futures market.
An important point to note is that at the time the Commerce Depart-
ment announces the preliminary US trade balance for a specific month, it
also announces the revised figures of its previous month’s trade balance
*The research benefits from helpful comments and discussions with Donald Lien and De-
Min Wu at the University of Kansas. Thanks also to Eugene C. Beaulieu at Columbia
University and participants at the Eastern Economics Association’s Annual Meetings, 1996,
in Boston for providing some insightful comments. Of course, the author is responsible for
any remaining errors. 371
© Blackwell Publishers Ltd, 1997. Published by Blackwell Publishers, 108 Cowley Road, Oxford
OX4 1JF, UK & 350 Main Street, Malden, MA 02148, USA.
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