The relationship between GDP and trade balance after 15 years of NAFTA

Abstract

This article proposes an econometric analysis based on the economic theory proposed by Thirlwall's law to establish the relationship between gross domestic product (GDP) -as an endogenous variable- and the trade balance -as an explanatory variable. One of the purposes of this study is to determine whether there was a substantial change in the values of these variables after the North American Free Trade Agreement (NAFTA) came into force. For this purpose, chronological data for the period 1989-2007 have been considered. Another objective is to specify an econometric model that helps to establish forecasts of the variables in the model over time.