A "clustering" test for two models of the Argentine trade balance

Abstract

The behavior of Argentina's trade balance has traditionally been associated with the specific allocation of resources between tradable and non-tradable goods and their respective consumption structures that resulted, on the one hand, from its abundant factor, land, and, on the other hand, from the industrialization process. A trade surplus can be interpreted as an excess supply of tradable goods. In this note, a trade balance model is developed based on the long-term determining factors of the excess supply of tradable goods, with the dynamic structure of the model selected from data for the period 1970-1982. Likewise, an empirical model of the trade balance can be carried out considering the variables that explain the imbalance in the money market. These models seem to provide the main alternative explanation for the behavior of the trade balance. Therefore, such a model is also estimated for comparison, using a similar econometric approach. Since an acceptable approximation to the data generating process should be able to explain the results found by alternative models, each of the two models is used to mutually evaluate the validity of the other.

JEL classification: C20 ; F14