The effects of exchange-rate volatility on commodity trade between the United States and Mexico.

Bahmani-Oskooee, Mohsen ; Hegerty, Scott W.

1. Introduction

With the breakdown of the Bretton Woods system in 1973, real exchange rates began to fluctuate greatly. As volatility increased, exporters and importers could no longer be as certain of the real prices of their goods. This increased risk would affect their expected profits, and thus influence their decision to trade. Exchange rate uncertainty has been shown to have affected trade flows between countries and across sectors, but it has had both positive and negative effects in different studies. Increased volatility has had important implications in assessing the costs and benefits of various exchange rate regimes, as well as of exchange rate controls. In this study, we assess the effect of this volatility on trade between the United States and Mexico based on the exports and imports of 102 industries from 1962 to 2004, and we find that it plays a role only for a small number of individual industries. (1)

Intuitively, one might surmise that uncertainty toward the real price of traded goods may reduce trade flows, as risk-averse buyers and sellers face possible losses due to exchange rate fluctuations, and thus choose not to partake in risky dealings. On the other hand, it has been hypothesized that exchange rate risk can actually increase trade flows, as importers and exporters opt to increase the volume of trade to attain a certain income, making up for a decrease in the per-unit value of a good by increasing the number of units bought or sold. The bulk of the literature points to the former conclusion, as reviewed by McKenzie (1999) and more recently by Bahmani-Oskooee and Hegerty (2007).

The trading relationship between Mexico and the United States is an important one. More than 70% of Mexico's exports go to the United States; likewise, Mexico is still the second-largest market for U.S. exports (after Canada). Mexico has taken advantage of its relatively inexpensive labor to attract U.S. manufacturing firms and expand its exports. Mexico imports automobile parts from the United States, for example, and then exports completed automobiles. Assembly-line factories, known as maquiladoras, have attracted much attention, but with the growth of China and competition from its even less expensive labor, this sector has actually declined. In addition, the United States is Mexico's main trading partner for agricultural products. Thus, the two countries share important trade flows across a wide variety of sectors.

Table 1 shows a breakdown of Mexico's top 15 export and import industries, in order of largest to smallest dollar value (or trade share), of the 102 industries that we analyze in our study. The rankings are given for the year 1980, in order to capture the preliberalization trade structure, and for the year 2004, to capture flows in the years after Mexico joined the General Agreement on Tarifs and Trade (GATT) and the North American Free Trade Agreement (NAFTA). (2)

The most striking observation in Table 1 is that the same manufacturing industries occupy top spots for both exports and imports. Road motor vehicles, exports of which have grown in importance since 1980, were also the top Mexican import in both 1980 and 2004. Likewise, such manufacturing industry categories as Telecommunications apparatus, Other electrical machinery, Machinery and appliances-non electrical, and Office machines make up a large part of both export and import flows. This evidence of strong interindustry trade suggests that the effect of the exchange rate, and, more importantly, its volatility, might be weak. Arndt (2004), for example, discussed how production-sharing between countries and firms leads to the insensitivity of the trade balance to changes in the real exchange rate. If firms are able to hedge against risk, they will avoid potential losses that arise from this type of uncertainty. We thus expect exchange rate volatility to have a limited effect on Mexico's trade with the United States.

Since the breakdown of Bretton Woods in 1973, the Mexican peso has fluctuated against the U.S. dollar. As shown by Figure 1, volatility in the peso/dollar real exchange rate has been exceptionally high after the peso devaluations of 1976, 1982, and 1986, as well as after 1994, when NAFTA was implemented and, later that year, when the peso was devalued sharply.

The empirical literature regarding Mexico shows volatility to have had a negative impact on overall trade. Three recent papers, while not dealing solely with Mexican trade, include Mexico in their multicountry studies. Arize, Osang, and Slottje (2000) examined 13 less-developed countries, including Mexico, using an error-correction model and found that volatility has had a significantly negative effect on aggregate exports in both the short- and long-term. Sauer and Bohara (2001) used a large panel annual data from the years 1973-1993 for 91 countries worldwide--and found that exchange rate volatility has had a negative impact on aggregate real exports. After dividing the sample into developed countries and regional groups of less-developed countries (LDCs), the authors concluded that Latin American LDCs are still negatively affected by volatility (as is Africa, but not Asia). In addition, Latin American exports are also significantly influenced by changes in the real exchange rate. Sauer and Bohara concluded that exporters in some LDCs are more exposed to exchange rate fluctuations because they lack methods of hedging their risk.

Most importantly, De Vita and Abbott (2004) used Pesaran, Shin, and Smith's (2001) bounds-testing Autoregressive Distributed Lag (ARDL) approach to examine U.S. exports to its five main markets, including Mexico. The authors also made use of dummy variables in the Mexican equation for structural breaks in 1988 and 1995. The authors found that for Mexico, peso/dollar exchange rate volatility has had a negative and significant effect. This, again, points to the conclusion that, at least at the bilateral level, exchange rate volatility tends to reduce trade flows.

None of these studies made use of disaggregated, industry-level data. Disaggregation of aggregate or bilateral trade data by commodity allows us to identify whether specific industries are affected negatively, positively, or not at all. Thus, there is an important gap in the literature for an analysis of U.S.-Mexico bilateral trade at the industry level. We close the gap with this paper by looking at the impact of exchange rate volatility on the imports and exports of 102 industries between the two countries. To this end, we introduce our models and estimation method in section 2. The empirical results are presented in section 3, and a summary and conclusion are given in section 4. Data definitions are cited in the Appendix.

2. The Model and the Method

Most studies test the effects of exchange rate volatility on trade model exports and/or imports as a function of the recipient country's income, the relative price level, and a measure of volatility. For exports, which are studied more often, foreign income is the determinant used; home income is used for import equations. These represent income and substitution effects: Higher income would be expected to increase purchases of a foreign country's output, but customers respond to the price of competing domestic goods relative to the traded goods. The relative price can either be expressed as the terms of trade or as the real exchange rate (terms of trade converted into one currency). We follow Kenen and Rodrik (1986), or Bahmani-Oskooee (2002), and use the real exchange rate as the measure of the relative price level, mostly because prices at the commodity level are not available. Thus, we express our models for Mexican imports of commodity i and Mexican exports of commodity i in loglinear form as follows:

ln [M.sub.i,t] = [[alpha].sub.i] + [beta][[NAFTA].sub.i] + [gamma] ln [Y.sup.Mex.sub.t] + [delta] ln [REX.sub.t] + [xi] ln [VOL.sub.t] + [[epsilon].sub.i,t], (1)

and

ln [X.sub.i,t] = [[alpha]'.sub.i] + [beta]'[[NAFTA].sub.i] + [gamma] ln [Y.sup.U.S.sub.t] + [delta]' ln [REX.sub.t] + [xi]' ln [VOL.sub.t] + [[epsilon]'.sub.i,t], (2)

where [M.sub.i,t] is a measure of Mexican import volume (U.S. exports) for industry i at time t, and [X.sub.i,t] represents Mexican export volume (U.S. imports) for industry i at time t. Variables are defined further in the appendix.

Trade flows were obtained from the World Bank's data on U.S. industry imports and exports. Since they are measured from the U.S. perspective, they capture costs as paid by the United States. Mexican exports (U.S. imports) are calculated as CIF (cost, insurance, and freight) values, to include all costs involved up to arrival in the United States. On the other hand, Mexican imports, which are actually measured as U.S. exports, are calculated as FOB (free on board) values, excluding all costs after shipment. As a result, CIF prices, and thus Mexican exports, might reflect changes in transport costs, while FOB prices (and Mexican imports) might not. (3) Since no other data are available for our use, the available data will be analyzed, keeping in mind the fact that exports and imports are treated separately throughout the analysis. The data are then deflated by price to focus on trade volumes, rather than trade data.

[FIGURE 1 OMITTED]

Due to a lack of commodity-level price data, a single import and export price deflator is used for all industries in each specification. This "second-best" deflator has been used successfully by Bahmani-Oskooee and Ardalani (2006), but it also introduces further potential issues. Since a single average price is used for all import or export industries, it captures overall (countrywide) price changes rather than industry-specific ones. A small industry that is facing small price increases might be "overdeflated" if larger industries that help make up the index are undergoing rapid inflation. Likewise, a small industry with larger-than-average price increases could find its trade values underdeflated. As a result, this measure might partially capture each industry's relative size. In this way, the model can be viewed as measuring each industry's share of the total, rather than true trade volumes.

Other possible deflators, while not readily available, could be constructed, but previous studies have not shown definitively that this approach is superior. Doyle (2003), for example, constructed bilateral, sectoral price indices for a small number of two-digit Standard International Trade Classification (SITC) categories to study exchange rate pass-through in Irish-United Kingdom trade. Here, however, the number of industries is much larger (and the industries themselves are smaller), making it both more time-consuming and potentially less accurate. Thus, industry-level price indices might not provide strong enough advantages to be worth their considerable costs. Another method, deflation by total imports or exports to form a trade share, raises problems of interpreting coefficients in the face of the fact that slower-than-average growth in one industry relative to the others might result in a negative coefficient. (4) As a result, this second-best deflator is retained, bearing these caveats in mind.

Using the available data and deflators, we are able to infer the effects of income, relative prices, and uncertainty on each industry's trade. Mexican imports depend positively on Mexican income [Y.sup.Mex]; exports also depend positively on U.S. income [Y.sup.U.S.]. Thus, the estimates of [gamma] in Equation 1 and [gamma]' in Equation 2 are expected to be positive. The variable [REX.sub.t] is the real peso/ dollar exchange rate at time t; an increase represents a depreciation of the peso. If real depreciation of the peso is to discourage Mexican imports and encourage exports of commodity i, an estimate of is expected to be negative, and an estimate of [delta]' is expected to be positive. The proxy for exchange rate volatility, [VOL.sub.t], is constructed as the standard deviation of the 12 monthly real exchange rate values within each year, which works well with an annual trade data set without sacrificing any of the annual observations. If increased volatility is to be detrimental to trade, estimates of [xi] and [xi]' are expected to be negative. Additionally, because the introduction of the NAFTA may have had an impact on the relationship between trade flows and their determinants--as a result of increased confidence, reduced risk, or other factors--we follow De Vita and Abbott (2004) and include a dummy variable that equals zero for the years 1962 to 1993 and equals one thereafter. (5)

These long-run equations need to be extended, however. Over the past two decades, econometricians have realized that simple regressions might capture "spurious correlations"--seemingly significant relationships between two unrelated variables that are really the result of certain outside factors. In order to eliminate this problem, cointegration analysis was introduced, most notably by Engle and Granger (1987). The error-correction mechanism is closely related to the concept of cointegration; it evaluates both short-run (disequilibrium) relationships between variables, as well as the long-run (cointegrated) relationship. Using this type of model, we are able to ascertain the short- and long-term effects of increased real exchange rate volatility. In formulating our error-correction specifications, we follow Pesaran, Shin, and Smith's (2001) ARDL bounds-testing approach as in Equations 3 and 4:

[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII], (3)

and

[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]. (4)

Since Bahmani-Oskooee and Goswami (2004) noted that the F-test is influenced by the number of lags in the model, an appropriate lag value j must first be chosen for each first-differenced variable in each model. While the fact that annual data are used suggests that a short lag might be best, we impose a maximum of four lags on each first-differenced variable and use the Akaike Information Criterion (AIC) to select the optimum number of lags.

Equations 3 and 4 are similar to the method of Engle and Granger (1987), but the equations include a linear combination of the lagged-level variables in place of the lagged error-correction term. In this type of specification, cointegration has been shown by Pesaran, Shin, and Smith (2001) to be present if all the lagged-level variables are jointly significant in the regression. This is done by using an F-test with new critical values. An upper-bound critical value is provided by assuming that all variables are integrated of order one, and a lower-bound critical value is provided by assuming all variables to be integrated of order zero, or stationary. Pesaran, Shin, and Smith showed that one can use these critical values even if some variables are integrated of order one and some are integrated of order zero. Therefore, an advantage of the bounds-testing approach is that variables could be integrated of order one or zero, eliminating the need for preliminary unit root testing.

This method is suitable for the topic at hand because of evidence from previous research that exchange rate volatility is usually stationary (e.g., Bahmani-Oskooee and Payesteh 1993; Doyle 2001; De Vita and Abbott 2004). We also found this to be the case with our data. This approach is applicable with both I(1) and I(0) variables. The second advantage of this approach is that one can infer the short-run and the long-run effects of any of the right-hand-side variables on the dependent variables in Equations 3 and 4. For example, the short-run effects of exchange rate volatility on the imports and exports of commodity i are given by the [f.sub.j]s in Equation 3 and [p.sub.j]s in Equation 4, respectively. Long-run effects are inferred by the estimate of [[theta].sub.4], which is normalized to [[theta].sub.1] in Equation 3, and by [[lambda].sub.4], which is normalized to [[lambda].sub.1] in Equation 4.

The coefficient estimates of Equations 3 and 4 do not reveal any information with regard to the adjustment path--that is, whether the adjustment of the variables is toward their long-term equilibrium value. To determine this feature of the model, at the suggestion of Pesaran, Shin, and Smith (2001), we use the long-term coefficient estimates and form an error-correction variable, [ECM.sub.t-1]. After replacing the lagged-level variables in each model by [ECM.sub.t-1], we re-estimate the model using the same lag structure as before. A negative and significant coefficient obtained for [ECM.sub.t-1] is indicative of adjustment toward equilibrium. Furthermore, as suggested by Bahmani-Oskooee and Ardalani (2006), a negative and significant coefficient for [ECM.sub.t-1] is also an alternative way of establishing cointegration among the variables.

While higher-frequency data might be desirable from an econometric standpoint, we are still able to arrive at interesting results with the available data set. The first step in our procedure is to establish the existence of cointegration via the F- and ECM tests. If the variables are indeed cointegrated, we report the short- and long-term coefficients from Equations 3 and 4. We then are able to assess the overall effects of exchange rate uncertainty in the short- and long-term.

3. Empirical Results

Using annual export and import data between Mexico and the United States over the period from 1962 to 2004, we estimate Equations 3 and 4 for each of 102 industries. (6) We report the cointegration test results, as well as the relevant coefficient estimates, for both total exports and imports and each industry's trade flows. These estimates provide some striking conclusions, not only for total trade flows, but also for our disaggregated export and import data.

Total Trade Flows

For the sake of comparison, we provide key results for total exports and imports alongside our industry analysis. The cointegration statistics are given in Table 2; the relevant short- and long-term coefficients are presented in Table 3 for exports and Table 4 for imports. Both exports and imports are found to be cointegrated with the explanatory variables; although, the evidence is somewhat weaker for Mexican imports. The key result from these total trade specifications is that neither the real exchange rate nor its volatility has any statistically significant long-run effect on aggregate export or import flows. This is consistent with our prediction that interindustry trade might render the peso/dollar exchange rate less effective on Mexico's total trade with the United States. It also suggests that the use of disaggregated data is necessary to uncover significant industry effects that are obscured when aggregate trade data are used. These effects will be discussed in more detail later.

Mexican Exports

Table 2 gives the results of our two cointegration tests for both exports and imports. (7) The results of the F-test for exports reveal that our calculated F statistic is greater than its critical value of 3.77 in 49 industries, providing support for cointegration among the variables of the export demand model. Support for cointegration increases to almost all cases when we consider the negative and significant coefficient obtained for [ECM.sub.t-1]. Thus, we proceed with evaluating the short- and long-run coefficient estimates for all of the models for which there is evidence of a cointegrating relationship. (8)

The results for each industry's optimum model are reported in a single table. Due to their large overall volume, we only report the short-run coefficient estimates for exchange rate volatility and the long-run coefficient estimates for all variables. The estimates for Mexico's export demand are reported in Table 3.

At the 10% level of significance, there are 61 industries in which exchange rate volatility has a significant short-term effect on Mexican exports to the United States. While in some industries, the effect is negative, in others, it is positive. For these 61 industries, exchange rate volatility has a temporary effect. The presence of short-term effects might suggest that traders perceive periods of volatility as temporary: Only those goods that are already contracted for export see their quantities change. Thus, these short-run coefficients show that volatility might cause a decrease in trade flows immediately or within a short period of time, but they do not indicate whether this effect is permanent.

To do this, we consider the long-run coefficient estimates. We find long-term effects in only 32 industries (which are positive for 11 industries and negative for 21). (9) These industries are identified in Table 3. More than two-thirds of the industries appear to be unaffected by exchange rate volatility in the long-term. The industries that are affected include durable as well as nondurable commodities. This finding contradicts Lee (1999), who used aggregate data to show that while durables are affected by exchange rate volatility, nondurables are not.

The income variable carries its expected positive sign in the majority of industries (64 of 102), signifying the importance of economic growth in the United States as a main determinant of Mexico's exports. Furthermore, the exports of 22 Mexican industries show a significantly positive long-term response to peso depreciation, and since the estimated elasticity is greater than one, real depreciation of the peso is expected to improve the trade balance of these industries, even though these industries' import demand could be inelastic. Nonetheless, this confirms a relative insensitivity of export behavior to changes in the bilateral exchange rate. Finally, the dummy variable NAFTA helps us to assess the effects of this trade agreement on export flows. While it captures any and all events after 1994, including the 1994 "Peso crisis," it does indicate a significant shift for 34 Mexican export industries.

We also performed a set of diagnostic tests, the results of which are available from the authors. First, the Lagrange Multiplier (LM) test was conducted to test for serial autocorrelation in the presence of lagged variables. Most of the models appear to be free of autocorrelation. We also performed a Ramsey/Regression Equation Specification Error Test (RESET) test for functional form and linearity; the low values for most of the models indicate that the null hypothesis of proper functional form cannot be rejected, and thus the models are correctly specified. Finally, [bar.[R.sup.2]] for each model is relatively high. A table that provides all relevant statistics discussed here is available upon request from the authors.

Mexican Imports

We next turn to the estimates of Mexico's import demand for each industry. Table 2 shows support for cointegration in these industries. The results for each optimum model are reported in Table 4.

From the short-run coefficient estimates, we find that there are 58 industries in which exchange rate volatility has a significant short-term effect (at the 10% level) on imports. The short-run estimates indicate that, as was the case with Mexican exports, uncertainty has a temporary effect on many categories of imports. Periods of high volatility thus are associated with a reduction or increase in trade, but when traders adjust, this effect disappears. There are long-term effects only in 33 cases. While in 11 industries the long-term effects are positive, in 22 industries, they are negative. These industries are listed in Table 4. The remaining 69 industries (more than two-thirds of the total) are unaffected.

From the long-term estimates, we gather that Mexican income is a significant determinant of Mexican imports of most commodities, just like U.S. income was for export demand in most industries. The real exchange rate carries its expected negative sign in only 10 cases, and since the absolute value of the estimated elasticity is greater than one, depreciation of the peso is expected to improve their trade balance. Again, we confirm the relative insensitivity of these two integrated economies' trade to the real exchange rate. Finally, the dummy variable NAFTA is significant in 52 import industries. More Mexican import industries seem to have been affected by this trade agreement than Mexican export industries. These vary by sector: Agricultural and manufacturing industries are affected, as are intermediate as well as final goods. (10)

Industry Effects and Implications

The overall results regarding the long-term effects of exchange rate volatility are highly informative in relation to the exports and imports of an LDC. Mexico's exports of agricultural goods are clearly depressed by uncertainty: Table 3 shows that no unprocessed agricultural good responds positively, while various animal, vegetable, and wood products make up 6 of the 21 industries with negative effects. Imports are also affected. While the category of Oil-seeds, oil nuts, and oil kernels does seem to increase because of uncertainty, 6 of the 21 industries in which volatility reduces import flows are agricultural in nature. Mexican textile exports also show clear negative effects due to uncertainty, not only for the category of Clothing except fur clothing, but also for the inputs of Textile and leather machinery and Textile yarn and thread (in Table 4).

Manufactures seem to make up a relatively large share of the industries with positive volatility effects. Example categories include exports of Domestic electrical equipment and imports of Metalworking machinery. However, the overall results are mixed: the Other goods category responds negatively (such as exports of Metalworking machinery and Office machines). Mexican imports of various intermediate goods also appear to be reduced (such as Metal containers for storage and transport and Nails, screws, nuts, bolts, rivets of iron, steel), suggesting that spillovers within industries might be taking place. This is not always the case, though--imports of Articles of paper, pulp, paperboard and Paper and paperboard reacted negatively to volatility, even though exports of printed matter were unaffected.

The relative size of industry trade flows appears to offer little explanation for the overall volatility results, however. When the industries are ranked by size, positive and negative effects are evenly distributed throughout the range. Effects do not seem to be concentrated in either large or small industries. Examples of large export industries that are affected by volatility are as follows: Alcoholic beverages (with 1.51% export share); Domestic electrical equipment (1.69%); Manufactures of metal, not specified elsewhere (1.87%); Clothing except fur clothing (6.25%), Furniture (3.89%); and Office machines (6.9%). Example of large export industries that are unaffected are as follows: Machinery and appliances-nonelectrical parts (with 5.32% export share); Other electrical machinery (4.8%); Power-generating machinery (3.8%); Road motor vehicles (23.08%); Telecommunications apparatus (15.49%); and Vegetables, roots, and tubers (2.26%). The same is true of many relatively small export industries (e.g., Crude animal materials, with 0.02% of export share in the affected group, and Cocoa, with 0.01% of export share in the unaffected group). Similar analysis also holds true of Mexico's import industries, as evidenced by the import shares reported in Table 4.

While the results presented here are somewhat mixed, and most industries are unaffected, the increased exchange rate volatility that has been the case since 1973 has had a negative effect on more Mexican industries than it has had positive effects. Mexican trade of agricultural goods and exports of textiles show most clearly that volatility has led to reduced trade, while the manufacturing sector demonstrates less clear-cut effects. In addition, the reduction of imports of intermediate goods shows that it is possible for these effects to have been transmitted to nontraded sectors in Mexico. This has clear implications for any LDC that faces exchange rate uncertainty while relying on exports of primary products and manufactures to promote growth.

We also performed an additional exercise to take into account the effects of fixed exchange rate policy on these trade flows. We re-estimated the models with an additional dummy variable to capture the regime shift from fixed to floating exchange rates that occurred in 1973. This dummy was set at zero from 1962 to 1972 and at one beginning in 1973. For Mexican exports, 35 of the 102 industries registered a significant coefficient for the dummy. With the addition of the dummy variable, 20 industries have significant coefficients (11 of which are from the original results). The results were similar for Mexican imports: The dummy coefficient was significant for only 18 industries before, and 20 industries in the recalculation have significant coefficients (13 of which are from the original results). This appears to indicate that as traders are better able to hedge against currency fluctuations, the effects of real exchange rate volatility are dampened somewhat.

4. Conclusion and Summary

While most of the literature that has studied the trade effects of exchange rate volatility has concluded that this uncertainty has depressed trade flows, some research--especially studies of trade at the sectoral level--has shown that volatility can increase the volume of trade. Uncertainty can cause risk-averse agents to refrain from trading, but it could also cause them to trade more by raising traders' marginal utility, or it could force them to make up in volume what they might lose in price.

Only a handful of studies have studied these effects on Mexican trade, even fewer have focused exclusively on Mexico, and no study has examined these effects at the disaggregated industry level. By analyzing 102 import and export industries, using annual data from 1962 to 2004, we found that increased real exchange rate volatility has had a significant short-term impact on the trade flows of a majority of the industries. Only about one-third of industries show a significant long-term, response; however, and about twice as many industries register a significantly negative effect than register positive effects. It is apparent that traders in more industries are risk-averse, reducing their economic activity in the face of uncertainty, than are willing to take advantage of fluctuations for potential gain. Still, economic integration and interindustry trade have helped to reduce the sensitivity of most trade flows to changes or uncertainty in the exchange rate.

We conclude that in the trade between the two countries, exchange rate volatility shows some significant short-term effects but that long-term effects are somewhat weaker. This implies that during the period of time when trade contracts are temporarily fixed, uncertainty does have an effect on trade. However, once traders can adjust their behavior, the impact of uncertainty disappears for the most part. Certain industries are still affected, however. Overall, Mexican agricultural trade, as well as textile imports, shows a clear reduction in activity as a result of exchange rate uncertainty. This result has an important application for discussions of the choice of exchange rate regime for exporting LDCs--even those that, like Mexico, are integrated with their partners to such an extent that exchange rate fluctuations have only weak effects.

This also has another implication for exchange rate policy. Because peso devaluations correspond with periods of high volatility, and high volatility has been shown to hurt trade in more industries than it helps, devaluations can have an indirect negative impact on the trade flows of some industries. Thus, some industries in this study that did not respond in the long-term to devaluations were affected by this negative "side effect." Mexican trade might benefit to some extent by both a stable peso/dollar exchange rate and a policy that avoids devaluations altogether.

Appendix

Data Definition

Annual data over the period 1962-2004 are used to carry out the empirical work. The data come from the following sources: (i) World Integrated Trade Solution (WITS) Database (World Bank 2006), and (ii) International Financial Statistics of the IMF (CD-ROM) 2006.

Variables

[X.sub.i] = For each industry i, X is defined as the volume of Mexican exports to the United States or U.S. imports from Mexico. Export value data in U.S. dollars for each commodity come from source i. In the absence of price levels for each commodity, as a second-best deflator, we follow Bahmani-Oskooee and Ardalani (2006) and use the aggregate import price index of the United States to deflate the nominal exports of each commodity. The aggregate import price index comes from source ii.

[M.sub.i] = For each industry i, M is defined as the volume of Mexican imports from the United States or U.S. exports to Mexico. Import value data for each commodity in U.S. dollars come from source i. Again, in the absence of price levels for each commodity, as a second-best alternative, we use the aggregate export price index of the United States to deflate the nominal values. The aggregate export price index comes from source ii.

[Y.sup.U.S.] = Measure of the United States' income. It is proxied by real gross domestic product (GDP) (base year 2000). The data come from source ii.

[Y.sup.Mex] = Mexico's real GDP (base year 2000), source ii.

REX = Real bilateral exchange rate between the U.S. dollar and Mexican peso defined as ([P.sub.US].NEX/[P.sub.ME]), where Pus is the consumer price index (CPI) (base year 2000) in the United States, [P.sub.ME] is the CPI (base year 2000) in Mexico, and NEX is the nominal bilateral exchange rate, defined as the number of pesos per dollar, Thus, an increase reflects a real depreciation of the peso or an appreciation of the dollar.

VOL = Following Bahmani-Oskooee and Mitra (2008). for each year, the volatility measure of real bilateral exchange rate (REX) is defined as the sample standard deviation of the 12 monthly real bilateral rates (REX) within that year. Monthly CPI data and nominal exchange rate data come from source ii.

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(1) For the list of industries, see Table 2.

(2) For detailed information on share of each industry out of total trade, see Tables 3 and 4.

(3) It has been noted that this difference in measurements ultimately treats transport (and thus total) costs asymmetrically. Transport costs oftentimes make up a large percentage of a good's overall price. If these costs are decreasing over time (due to improvements in technology and economies of scale), CIF trade values might decrease, even though the actual volume of trade is steady or even increasing. At the same time, FOB values might not change. If transport costs are relatively steady, however, this asymmetry might not make a large difference in our analysis of the effects of increasing uncertainty on trade quantities. Thus, if transport costs make up a relatively constant share of the CIF price, the costs themselves ought not to be affected by volatility.

(4) We also estimated all models using these trade shares, however, and arrived at similar overall results.

(5) If the NAFTA dummy was shown to be insignificant (at the 10% level), it was excluded from the estimation procedure, and the equation was re-estimated.

(6) Before estimating the models, we used the Augmented Dickey-Fuller (ADF) test to make sure that all variables were either I(0) or I(1). Most variables were I(1), and there were no 1(2) variables. The volatility term was I(0). These results are available from the authors upon request.

(7) Note that the long-run coefficient estimates that are used in constructing lagged error-correction term, [ECM.sub.t-1], do appear in Table 2 for Mexican exports and Table 4 for Mexican imports.

(8) Although within the bounds-testing approach a significant F or [ECM.sub.t-1] statistic justifies the existence of at least one cointegrating vector, we also used Johansen's method to determine if there were additional vectors. After adjusting for the number of observations, the number of lags, and the number of regressors, Johansen's [lambda]-max or trace statistic revealed more than one cointegrating vector in many cases. Since the volatility measure is an I(0) variable, the estimates of these vectors using Johansen's technique exclude the volatility measure. Estimating additional vectors within the bounds-testing approach amounts to switching the dependent variable with any of the independent variables in error-correction Equations 3 and 4. However, in identifying the vector of interest, we follow economic theory and concentrate on the export and import demand models. The Johansen results are available from the authors upon request.

(9) Again, at the 10% level of significance.

(10) The LM test again indicates autocorrelation-free residuals, and the RESET statistic shows correctly specified models. Furthermore, the estimated models mostly enjoy high adjusted [R.sup.2] statistics. This information is available upon request.

Mohsen Bahmani-Oskooee, Department of Economics, P.O. Box 413, Bolton Hall 822, University of Wisconsin Milwaukee, Milwaukee, WI 53201, USA: Phone 414-229-4334; E-mail Bahmani@uwm.edu; corresponding author.

Scott W. Hegerty, Department of Economics, P.O. Box 413, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA; E-mail hegertys@beloit.edu.

We would like to thank our anonymous referees for their valuable comments. Any error, however, is ours.

Received October 2007; accepted July 2008.

Table 1. Top 15 Industries (by Dollar Value of Trade)

                          Mexican Exports

1980                                            2004

Telecommunications apparatus      Road motor vehicles
Other electrical machinery and    Telecommunications apparatus
  apparatus, n.e.s.
Fish, fresh and simply            Office machines
  preserved
Vegetables, fresh, chilled,       Clothing except fur clothing
  frozen, or simply preserved;
  roots, tubers, and other
  edible vegetable products,
  n.e.s., fresh or dried
Coffee                            Nonelectrical machinery and
                                    appliances
Clothing except fur clothing      Scientific, medical, optical,
                                    measuring and controlling
                                    instruments and apparatus
Works of art, collector's         Other electrical machinery and
  pieces, and antiques              apparatus, n.e.s.
Road motor vehicles               Furniture

Inorganic chemical elements,      Power-generating machinery
  oxides and halogen salts          and parts thereof, n.e.s.
Petroleum products                Vegetables, fresh, chilled,
                                    frozen or simply preserved;
                                    roots, tubers, and other
                                    edible vegetable products,
                                    n.e.s., fresh or dried
Nonelectrical machinery and       Manufactures of metal, n.e.s.
  appliances
Office machines                   Domestic electrical equipment
Musical instruments, sound        Petroleum products
  recorders
Sulfur and unroasted iron         Alcoholic beverages
  pyrites
Fruit, fresh, and nuts,           Sanitary, plumbing, heating
  excluding oil nuts                and lighting fixtures and
                                    fittings, n.e.s.

                         Mexican Imports

1980                                            2004

Road motor vehicles               Road motor vehicles
Nonelectrical machinery and       Other electrical machinery and
  appliances                        apparatus, n.e.s.
Other electrical machinery and    Office machines
  apparatus, n.e.s.
Power-generating machinery and    Nonelectrical machinery and
  parts thereof, n.e.s.             appliances
Organic chemicals                 Telecommunications apparatus
Machines for special              Scientific, medical, optical,
  industries                        measuring and controlling
                                    instruments and apparatus
Oil-seeds, oil nuts, and oil      Organic chemicals
  kernels
Agricultural machinery and        Articles of artificial plastic
  implements                        materials
Telecommunications apparatus      Power-generating machinery and
                                    parts thereof, n.e.s.
Office machines                   Petroleum products
Universals, plates, and sheets    Manufactures of metal, n.e.s.
  of iron and steel
Vegetables, fresh, chilled,       Clothing except fur clothing
  frozen, or simply preserved;
  roots, tubers, and other
  edible vegetable products,
  n.e.s., fresh or dried
Paper and paperboard              Woven fabrics of man-made
                                    textile materials (not
                                    including narrow or
                                    special fabrics)
Musical instruments, sound        Meat, fresh, chilled, or frozen
  recorders
Tubes, pipes, and fittings of     Articles of paper, pulp,
  iron or copper                    paperboard

Table 2. Cointegration Results

                                                   Mexican Exports

Industry                                         F (a)   [ECM.sub.t-1]

Total trade                                       4.66   -0.39 (4.61)
Agricultural machinery and implements             4.03   -0.78 (3.58)
Alcoholic beverages                               5.13   -0.51 (4.52)
Animal/vegetable oils and fats, processed         2.90   -0.30 (3.61)
Articles of artificial plastic materials          3.92   -0.30 (4.12)
Articles of paper, pulp, paperboard               1.56   -0.10 (2.50)
Articles of rubber, n.e.s.                        3.04   -0.29 (3.86)
Chemical materials and products, n.e.s.           6.10   -0.51 (4.12)
Chocolate and other food preparations             8.73   -0.94 (6.51)
Clay and refractory construction materials        3.99   -0.45 (4.16)
Clothing except fur clothing                     24.67   -0.17 (9.90)
Cocoa                                             7.42   -0.80 (5.65)
Copper                                            5.45   -0.54 (4.55)
Cotton                                            3.13   -0.85 (2.99)
Cotton fabrics, woven                             2.31   -0.05 (3.20)
Crude animal materials, n.e.s.                    1.71   -0.19 (2.99)
Crude rubber, including synthetic                 2.32   -0.28 (2.81)
  and reclaimed
Developed cinematographic film                    4.85   -0.37 (4.79)
Domestic electrical equipment                     3.16   -0.22 (1.79)
Essential oils, perfume, and flavor materials     5.68   -0.74 (5.86)
Feeding-stuff for animals and unmilled cereals    2.77    0.05 (3.54)
Fertilizers manufactured                          1.25   -0.04 (1.21)
Fish, fresh and simply preserved                  2.23   -0.33 (2.98)
Fish, in airtight containers, n.e.s.              5.09   -0.36 (4.78)
Floor coverings, tapestries, etc.                 5.89   -0.41 (5.08)
Food preparations, n.e.s.                         7.92   -0.55 (5.73)
Footwear                                         13.53   -0.25 (7.75)
Fruit, fresh, and nuts (excluding oil-nuts)       2.13   -0.08 (3.01)
Fruit, preserved and fruit preparations           5.43   -0.81 (4.60)
Fuel wood and charcoal                            2.45   -0.30 (3.42)
Furniture                                         3.86   -0.24 (3.95)
Glass                                             4.34   -0.37 (4.22)
Glassware                                         4.12   -0.48 (5.34)
Hides and skins (excluding fur skins),            1.31   -0.09 (2.32)
  undressed
Household equipment of base metals                8.19    0.01 (6.06)
Inorganic chemical elements, oxides, halogen      2.04   -0.07 (2.95)
  salts
Iron steel castings, forgings, unwork             5.65   -0.20 (4.70)
Jewelery and gold/silversmiths' wares            2.67   -0.40 (3.36)
Lead                                              4.91   -0.73 (4.68)
Leather                                           2.50   -0.22 (3.28)
Lime, cement, and fabricated building            12.14   -0.62 (7.45)
  material (excluding glass)
Machinery and appliances-nonelectrical            2.71   -0.14 (3.30)
Machines for special industries                   4.83   -0.60 (4.30)
Made-up articles, wholly or chiefly of            1.92   -0.23 (2.93)
  textile materials
Manufactured articles, n.e.s.                     2.02   -0.16 (3.58)
Manufactures of leather or composition leather    8.24    0.04 (6.16)
Manufactures of metal, n.e.s.                     1.03   -0.47 (3.33)
Meat, fresh, chilled, or frozen                   1.45   -0.47 (4.83)
Medicinal and pharmaceutical products             1.04    0.00 (1.37)
Metal containers for storage and transport        3.52   -0.56 (4.00)
Metalworking machinery                           10.75   -1.16 (6.12)
Mineral manufactures, n.e.s.                      1.43   -0.37 (2.21)
Miscellaneous nonferrous base metals employed     2.62   -0.24 (3.32)
  in metallurgy
Musical instruments, sound recorders              2.75   -0.13 (3.36)
Nails, screws, nuts, bolts, rivets of             3.35   -0.48 (3.79)
  iron, steel
Nonferrous metal scrap                            5.74   -0.38 (5.05)
Office machines                                   5.90   -0.28 (5.16)
Oil-seeds, oil nuts, and oil kernels              4.15   -0.39 (3.95)
Ores and concentrates of nonferrous metals        6.53   -1.07 (4.43)
Organic chemicals                                 3.02   -0.36 (2.21)
Other crude minerals                              1.24   -0.12 (2.16)
Other electrical machinery and apparatus          5.12   -0.17 (4.60)
Other inorganic chemicals                         4.05   -0.51 (4.23)
Paper and paperboard                              6.55   -0.48 (5.54)
Pearls and precious and semiprecious stones       3.63   -0.46 (3.70)
Perambulators, toys, games, and sporting goods    3.05   -0.20 (3.51)
Perfumery, cosmetics, dentifrices                 2.89   -0.67 (3.36)
Petroleum products                                1.14   -0.05 (2.05)
Pigments, paints, varnishes, and related          3.48   -0.56 (3.37)
  materials
Pottery                                           1.46   -0.15 (2.47)
Power-generating machinery                        8.59   -0.45 (6.16)
Printed matter                                    3.86   -0.36 (3.06)
Road motor vehicles                               2.28   -0.21 (3.12)
Sanitary, plumbing, heating and                   3.01   -0.07 (3.65)
  lighting fixtures
Scientific, medical, optical, meas./co            3.60   -0.23 (3.98)
Ships and boats                                   2.31   -0.26 (3.22)
Soaps, cleansing and polishing preparations       3.79   -0.31 (3.52)
Special textile fabrics                           1.56   -0.03 (2.64)
Spices                                            6.73    0.03 (5.34)
Stone, sand, and gravel                           8.31   -0.80 (5.28)
Sugar and honey                                   2.44    0.03 (3.33)
Sugar confectionary, excluding chocolate          4.30   -0.53 (4.25)
Sulfur and unroasted iron pyrites                 3.40   -0.67 (4.36)
Telecommunications apparatus                     40.11   -0.39 (13.3)
Textile and leather machinery                     6.03   -0.64 (4.96)
Textile fabrics                                   3.20   -0.42 (4.33)
Textile yarn and thread                           4.89   -0.43 (4.74)
Tobacco manufactures                              5.09   -0.50 (4.67)
Tools for use in the hand or in machines          5.19   -0.57 (4.77)
Travel goods, handbags, and similar goods         3.65   -0.17 (3.98)
Tubes, pipes, and fittings of iron                1.92   -0.68 (2.93)
Tulles, lace, embroidery, ribbons, trimmings      2.39   -0.52 (3.19)
Universals, plates and sheets of iron             1.61   -0.04 (2.66)
Vegetable fibers, except cotton and jute          3.16   -0.17 (3.72)
Vegetables, roots and tubers, fresh               2.88   -0.50 (3.74)
Vegetables, roots and tubers, preserved           7.82   -0.57 (5.95)
Veneers, plywood boards, and other wood           5.48   -0.44 (4.90)
Wood in the rough or roughly square               8.04   -1.08 (3.02)
Wood manufactures, n.e.s.                         1.50   -0.27 (2.42)
Wood, shaped or simply worked                     5.87   -0.20 (4.24)
Wool and other animal hair                        3.60   -0.04 (3.88)
Works of art, collectors pieces, and antiques     1.79   -0.14 (2.20)
Zinc                                              4.24   -0.88 (4.30)

                                                   Mexican Imports

Industry                                         F (a)   [ECM.sub.t-1]

Total trade                                       3.22   -0.18 (2.36)
Agricultural machinery and implements             8.20   -1.15 (5.45)
Alcoholic beverages                               7.56   -0.33 (6.02)
Animal/vegetable oils and fats, processed         2.54   -0.91 (4.09)
Articles of artificial plastic materials          4.78    0.07 (4.64)
Articles of paper, pulp, paperboard               5.29   -0.29 (4.88)
Articles of rubber, n.e.s.                        5.84   -0.40 (4.73)
Chemical materials and products, n.e.s.           4.50   -0.22 (2.87)
Chocolate and other food preparations             4.55   -0.23 (4.24)
Clay and refractory construction materials        6.90   -1.16 (5.11)
Clothing except fur clothing                      4.02   -0.25 (3.63)
Cocoa                                             1.57   -0.16 (2.55)
Copper                                            2.81   -0.62 (3.53)
Cotton                                            4.82   -0.46 (4.55)
Cotton fabrics, woven                             3.38   -0.17 (2.01)
Crude animal materials, n.e.s.                   12.81   -O.19 (5.80)
Crude rubber, including synthetic                 7.43   -1.05 (7.03)
  and reclaimed
Developed cinematographic film                    3.91   -0.37 (4.05)
Domestic electrical equipment                     2.75   -0.25 (3.43)
Essential oils, perfume, and flavor materials     2.82   -0.15 (3.53)
Feeding-stuff for animals and unmilled cereals    6.69   -0.92 (4.69)
Fertilizers manufactured                          7.08   -0.60 (5.65)
Fish, fresh and simply preserved                  5.82   -0.28 (5.07)
Fish, in airtight containers, n.e.s.              5.47   -0.79 (3.84)
Floor coverings, tapestries, etc.                 4.97    0.02 (4.78)
Food preparations, n.e.s.                         1.07    0.01 (1.76)
Footwear                                          4.02   -0.14 (4.06)
Fruit, fresh, and nuts (excluding oil-nuts)       1.21   -0.16 (1.81)
Fruit, preserved and fruit preparations           4.76   -0.64 (3.84)
Fuel wood and charcoal                            6.61   -0.95 (4.34)
Furniture                                         6.08   -0.19 (4.94)
Glass                                             4.24   -0.30 (4.51)
Glassware                                         1.72   -0.16 (2.65)
Hides and skins (excluding fur skins),            1.68   -0.14 (2.75)
  undressed
Household equipment of base metals                3.61   -0.24 (4.04)
Inorganic chemical elements, oxides, halogen     28.48   -0.91 (11.30)
  salts
Iron steel castings, forgings, unwork             1.84   -0.21 (2.79)
Jewelery and gold/silversmiths' wares             3.07   -0.24 (3.33)
Lead                                              8.61   -0.57 (5.79)
Leather                                           0.91   -0.17 (2.06)
Lime, cement, and fabricated building             8.35   -0.63 (6.04)
  material (excluding glass)
Machinery and appliances-nonelectrical            5.35   -0.30 (3.34)
Machines for special industries                  10.02   -0.65 (6.58)
Made-up articles, wholly or chiefly of            3.53   -0.23 (3.96)
  textile materials
Manufactured articles, n.e.s.                     1.81   -0.28 (2.67)
Manufactures of leather or composition leather    2.45   -0.38 (3.04)
Manufactures of metal, n.e.s.                     1.03   -0.12 (1.51)
Meat, fresh, chilled, or frozen                   3.22   -0.02 (3.74)
Medicinal and pharmaceutical products             1.19   -0.01 (2.29)
Metal containers for storage and transport        3.10   -0.37 (3.67)
Metalworking machinery                            5.68   -0.89 (4.67)
Mineral manufactures, n.e.s.                     14.03   -0.51 (6.33)
Miscellaneous nonferrous base metals employed     2.91   -0.31 (3.48)
  in metallurgy
Musical instruments, sound recorders              3.70   -0.35 (3.87)
Nails, screws, nuts, bolts, rivets of             2.50   -0.20 (2.42)
  iron, steel
Nonferrous metal scrap                            4.39   -0.17 (4.80)
Office machines                                   4.05   -0.35 (4.42)
Oil-seeds, oil nuts, and oil kernels              3.62   -0.28 (4.04)
Ores and concentrates of nonferrous metals        5.10   -0.48 (4.73)
Organic chemicals                                 3.46   -0.44 (3.71)
Other crude minerals                              9.75   -0.79 (6.34)
Other electrical machinery and apparatus          3.65   -0.29 (2.98)
Other inorganic chemicals                         6.50   -0.52 (4.37)
Paper and paperboard                              3.41   -0.30 (3.12)
Pearls and precious and semiprecious stones       3.97   -0.58 (5.14)
Perambulators, toys, games, and sporting goods    3.36   -0.32 (3.87)
Perfumery, cosmetics, dentifrices                 1.60   -0.09 (2.69)
Petroleum products                                6.11   -0.88 (5.66)
Pigments, paints, varnishes, and related          1.51   -0.05 (2.47)
  materials
Pottery                                           3.25   -0.38 (3.79)
Power-generating machinery                        3.37   -0.59 (3.86)
Printed matter                                    1.45   -0.20 (2.06)
Road motor vehicles                               2.63   -0.29 (3.07)
Sanitary, plumbing, heating and                   1.75   -0.14 (2.71)
  lighting fixtures
Scientific, medical, optical, meas./co            3.49   -0.02 (3.90)
Ships and boats                                   9.98   -0.92 (6.47)
Soaps, cleansing and polishing preparations       2.09   -0.08 (3.01)
Special textile fabrics                           4.75   -0.71 (4.16)
Spices                                            4.25   -1.21 (4.17)
Stone, sand, and gravel                           7.35   -0.96 (5.66)
Sugar and honey                                   4.56   -0.99 (4.54)
Sugar confectionary, excluding chocolate          0.65   -0.10 (1.25)
Sulfur and unroasted iron pyrites                 3.54   -1.07 (4.31)
Telecommunications apparatus                      3.49   -0.18 (3.50)
Textile and leather machinery                     8.58   -0.60 (3.94)
Textile fabrics                                   2.67   -0.17 (2.93)
Textile yarn and thread                           5.80   -0.37 (4.81)
Tobacco manufactures                              2.86   -0.20 (3.61)
Tools for use in the hand or in machines          5.60   -0.49 (3.93)
Travel goods, handbags, and similar goods         1.55   -0.09 (2.51)
Tubes, pipes, and fittings of iron                6.45   -0.91 (5.39)
Tulles, lace, embroidery, ribbons, trimmings      5.81   -0.68 (4.43)
Universals, plates and sheets of iron             2.54   -0.53 (3.50)
Vegetable fibers, except cotton and jute          1.62   -0.18 (2.54)
Vegetables, roots and tubers, fresh               7.04   -0.93 (4.77)
Vegetables, roots and tubers, preserved           2.44   -0.32 (2.53)
Veneers, plywood boards, and other wood           3.41   -0.06 (3.95)
Wood in the rough or roughly square               4.99   -0.18 (4.73)
Wood manufactures, n.e.s.                         3.62   -0.17 (3.89)
Wood, shaped or simply worked                     3.38   -0.19 (3.94)
Wool and other animal hair                        4.79   -0.66 (3.88)
Works of art, collectors pieces, and antiques    13.88   -1.50 (8.06)
Zinc                                              7.28   -0.66 (5.03)

(a) The upper bound critical value for the F-statistic with
unrestricted intercept and no trend at the 10% level of significance
is 3.77. This comes from Pesaran, Shin, and Smith (2001, their
Table CI(iii) Case III, p. 300).

Table 3: Short-Run and Long-Run Coefficient Estimates, Mexican
Export Equation Absolute Value of t Ratio in Parentheses)

                                       Short-Run Coefficient Estimates

Industry (Share of Total                 [DELTA]ln      [DELTA]ln
Exports in Parentheses)                 [VOL.sub.t]   [VOL.sub.t-1]

Total exports                           0.01 (0.73)     0.29 (1.97)

Industries positively affected
    by volatility (numbers in
    % are export shares)

  Alcoholic beverages (1.51%)           0.01 (0.55)    -0.07 (2.59)

  Domestic electrical
    equipment (1.69%)                   0.34 (3.14)

  Food preparations, n.e.s. (0.22%)     0.09 (1.90)

  Glass (0.57%)                         0.17 (2.06)

  Lime, cement, and fabricated
    building material (excluding
    (0.22%) glass)                     -0.04 (0.88)    -0.41 (3.94)

  Machines for special
    industries (0.50%)                  0.13 (1.68)

  Manufactures of metal,
    n.e.s. (1.87%)                      0.12 (2.26)

  Perfumery, cosmetics,
    dentifrices (0.09%)                -0.15 (1.06)    -0.41 (3.02)

  Pigments, paints, varnishes,
    and related materials (0.09%)       0.19 (2.14)

  Tobacco manufactures (0.00%)          0.12 (1.25)

  Veneers, plywood boards, and
    other wood (0.03%)                  0.19 (2.36)

Industries negatively affected
    by volatility

  Animal/vegetable oils and fats,
    processed (0.00%)                  -0.10 (1.17)     0.31 (3.04)

  Clothing except fur clothing
    (6.25%)                            -0.04 (1.37)     0.21 (334)

  Crude animal materials, n.e.s.
    (0.02%)                            -0.05 (1.72)

  Crude rubber, including synthetic
    and reclaimed (0.10%)              -0.21 (2.50)

  Essential oils, perfume, and
    flavor materials (0.03%)           -0.13 (2.25)

  Fruit, preserved and fruit
    preparations (0.23%)               -0.14 (2.38)

  Fuel wood and charcoal (0.01%)        0.06 (0.68)     0.30 (2.17)

  Furniture (3.89%)                    -0.02 (0.69)     0.07 (2.27)

  Iron steel castings, forgings,
    unwork (0.07%)                     -0.29 (2.23)     1.01 (5.09)

  Metalworking machinery (0.03%)       -0.04 (0.27)     1.63 (4.50)

  Nonferrous metal scrap (0.15%)       -0.01 (0.22)     0.52 (3.39)

  Office machines (6.90%)               0.04 (0.69)     0.32 (3.01)

  Ores and concentrates of
    nonferrous metals (0.09%)          -0.27 (2.22)     0.17 (1.49)

  Soaps, cleansing and polishing
    preparations (0.19%)               -0.24 (2.57)

  Stone, sand, and gravel (0.09%)       0.11 (0.77)     0.80 (3.28)

  Textile and leather machinery        -0.39 (2.39)
    (0.21%)

  Textile yarn and thread (0.35%)      -0.04 (0.43)     0.71 (4.05)

  Vegetable fibers, except cotton
    and jute (0.00%)                   -0.43 (2.72)     0.16 (0.83)

  Vegetables, roots and tubers,
    fresh (0.19%)                      -0.19 (3.15)     0.10 (2.44)

  Wood in the rough or roughly
    square (0.00%)                     -0.69 (2.41)     0.90 (1.57)

  Wood, shaped or simply worked
    (0.09%)

  Industries not affected by
    volatility                         -0.24 (1.86)     0.23 (1.80)

  Agricultural machinery and
    implements (0.21%)                 -0.13 (1.17)    -0.19 (1.70)

  Articles of artificial plastic
    materials (0.99%)                   0.03 (0.43)

  Articles of paper, pulp,
    paperboard (0.52%)                  0.12 (1.66)     0.13 (1.63)

  Articles of rubber, n.e.s.
    (0.47%)                            -0.03 (0.24)    -0.30 (1.94)

  Chemical materials and products,
    n.e.s. (0.22%)                     -0.09 (0.88)    -0.18 (1.85)

  Chocolate and other food
    preparations (0.07%)               -0.12 (1.27)     0.06 (0.33)

  Clay and refractory construction
    materials (0.19%)                  -0.03 (0.84)

  Cocoa (0.01%)                        -0.01 (0.05)    -0.24 (1.73)

  Copper (0.41%)                       -0.22 (2.12)     0.25 (2.31)

  Cotton (0.01%)                       -0.01 (0.06)

  Cotton fabrics, woven (0.08%)        -0.16 (1.05)     0.22 (1.09)

  Developed cinematographic            -0.14 (1.16)
    film (0.00%)

  Feeding-stuff for animals,
    excluding unmilled cereals
    (0.01%)                             0.01 (0.07)     0.44 (1.32)

  Fertilizers manufactured (0.01%)     -0.36 (1.97)     0.46 (2.92)

  Fish, fresh and simply preserved
    (0.37%)                             0.00 (0.12)

  Fish, in airtight containers,
    n.e.s. (0.03%)                      0.07 (0.90)     0.03 (0.22)

  Floor coverings, tapestries, etc.
    (0.01%)                             0.18 (2.67)     0.31 (3.29)

  Footwear (O.18%)                      0.04 (1.30)     0.13 (2.18)

  Fruit, fresh, and nuts (excluding
    oil-nuts) (0.99%)                  -0.04 (1.14)

  Glassware (0.26%)                    -0.07 (1.57)    -0.04 (0.40)

  Hides and skins (excluding fur
    skins), undressed (0.01 %)          0.17 (0.75)

  Household equipment of base
    metals (0.39%)                     -0.06 (1.24)

  Inorganic chemical elements,
    oxides, halogen salts (0.17%)       0.12 (2.72)

  Jeeselery and gold/silversmiths'
    wares (0.29%)                       0.09 (1.26)

  Lead (0.01%)                         -0.01 (0.14)     0.28 (2.34)

  Leather (0.05%)                      -0.08 (0.84)

  Machinery and appliances-
    nonelectrical (5.32%)               0.01 (0.22)

  Made-up articles, wholly or
    chiefly of textile material
    (0.63%)                            -0.10 (1.17)    -0.28 (2.38)

  Manufactured articles, n.e.s.
    (0.42%)                            -0.01 (0.27)     0.02 (0.27)

  Manufactures of leather or
    composition leather (0.06%)        -0.07 (1.61)     0.45 (3.94)

  Meat, fresh, chilled, or frozen
    (0.03%)                            -0.47 (1.94)

  Medicinal and pharmaceutical
    products (0.42%)                    0.11 (1.62)

  Metal containers for storage and
    transport (0.09%)                  -0.05 (0.43)     0.15 (1.09)

  Mineral manufactures, n.e.s.
    (0.24%)                            -0.04 (0.77)

  Miscellaneous nonferrous base
    metals/in metallurgy (0.01%)        0.06 (0.71)     0.16 (2.21)

  Musical instruments, sound
    recorders (0.57%)                  -0.07 (1.22)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.06%)      -0.08 (0.70)

  Oil-seeds, oil nuts, and oil
    kernels (0.01%)                     0.04 (0.73)

  Organic chemicals (0.33%)            -0.02 (0.19)

  Other crude minerals (0.05%)         -0.10 (2.57)

  Other electrical machinery
    and apparatus (4.80%)              -0.02 (0.61)

  Other inorganic chemicals (0.11%)    -0.16 (2.82)

  Paper and paperboard (0.12%)         -0.02 (0.18)

  Pearls and precious and
    semiprecious stones (0.00%)         0.12 (0.68)

  Perambulators, toys, games, and
    sportinggoods (0.49%)               0.02 (0.24)

  Petroleum products (1.55%)            0.03 (0.24)

  Pottery (0.04%)                       0.04 (0.71)

  Power-generating machinery (3.80%)    0.05 (1.09)

  Printed matter (0.23%)                0.01 (0.22)

  Road motor vehicles (23.08%)          0.03 (0.23)

  Sanitary, plumbing, heating and
    lighting fixtures (1.02%)          -0.12 (2.96)     0.01 (0.30)

  Scientific, medical, optical,
    meas./co. (4.98%)                   0.00 (0.04)    -0.11 (1.30)

  Ships and boats (0.06%)               0.06 (0.41)

  Special textile fabrics (0.18%)      -0.05 (0.84)     0.16 (2.53)

  Spices (0.03%)                        0.02 (0.39)     0.13 (1.75)

  Sugar and honey (0.05%)               0.07 (0.58)     0.51 (2.31)

  Sugar confectionary, excluding
    chocolate (0.24%)                   0.04 (0.31)

  Sulfur and unroasted iron pyrites
    (0.03%)                             0.10 (1.12)

  Telecommunications apparatus
    (15.49%)                            0.04 (0.89)

  Textile fabrics (0.02%)              -0.04 (0.43)

  Tools for use in the hand or in      -0.08 (0.44)
    machines (0.10%)

  Travel goods, handbags, and
    similar containers (0.06%)         -0.01 (0.15)

  Tubes, pipes, and fittings of
    iron (0.37%)                        0.01 (0.14)     0.01 (0.08)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.05%)          0.12 (0.69)

  Universals, plates and sheets of
    iron (0.58%)                        0.12 (0.71)

  Vegetables, roots and tubers,
    preserved (2.26%)                  -0.02 (0.53)    -0.05 (1.35)

  Wood manufactures, n.e.s. (0.19%)     0.00 (0.08)

  Wool and other animal hair (0.00%)   -0.30 (2.16)

  Works of art, collectors pieces,
    and antiques (0.02%)               -0.01 (0.06)

  Zinc (0.16%)                         -0.09 (0.61)

                                       Short-Run Coefficient Estimates

Industry (Share of Total                 [DELTA]ln       [DELTA]ln
Exports in Parentheses)                [VOL.sub.t-2]   [VOL.sub.t-3]

Total exports

Industries positively affected
    by volatility (numbers in
    % are export shares)

  Alcoholic beverages (1.51%)

  Domestic electrical
    equipment (1.69%)

  Food preparations, n.e.s. (0.22%)

  Glass (0.57%)

  Lime, cement, and fabricated
    building material (excluding
    (0.22%) glass)                     -0.22 (2.61)    -0.09 (1.79)

  Machines for special
    industries (0.50%)

  Manufactures of metal,
    n.e.s. (1.87%)

  Perfumery, cosmetics,
    dentifrices (0.09%)

  Pigments, paints, varnishes,
    and related materials (0.09%)

  Tobacco manufactures (0.00%)

  Veneers, plywood boards, and
    other wood (0.03%)

Industries negatively affected
    by volatility

  Animal/vegetable oils and fats,
    processed (0.00%)                   0.15 (2.15)

  Clothing except fur clothing
    (6.25%)                             0.13 (2.73)     0.05 (1.75)

  Crude animal materials, n.e.s.
    (0.02%)

  Crude rubber, including synthetic
    and reclaimed (0.10%)

  Essential oils, perfume, and
    flavor materials (0.03%)

  Fruit, preserved and fruit
    preparations (0.23%)

  Fuel wood and charcoal (0.01%)        0.12 (1.60)

  Furniture (3.89%)

  Iron steel castings, forgings,
    unwork (0.07%)                      0.32 (2.53)

  Metalworking machinery (0.03%)        0.98 (3.32)     0.42 (2.76)

  Nonferrous metal scrap (0.15%)        0.27 (2.52)     0.09 (1.48)

  Office machines (6.90%)               0.19 (2.73)     0.06 (1.37)

  Ores and concentrates of
    nonferrous metals (0.09%)

  Soaps, cleansing and polishing
    preparations (0.19%)

  Stone, sand, and gravel (0.09%)       0.32 (2.14)

  Textile and leather machinery
    (0.21%)

  Textile yarn and thread (0.35%)       0.59 (3.87)     0.29 (2.90)

  Vegetable fibers, except cotton
    and jute (0.00%)                    0.26 (1.92)

  Vegetables, roots and tubers,
    fresh (0.19%)

  Wood in the rough or roughly
    square (0.00%)                      0.58 (1.33)     0.50 (1.88)

  Wood, shaped or simply worked
    (0.09%)

  Industries not affected by
    volatility

  Agricultural machinery and
    implements (0.21%)

  Articles of artificial plastic
    materials (0.99%)

  Articles of paper, pulp,
    paperboard (0.52%)

  Articles of rubber, n.e.s.
    (0.47%)

  Chemical materials and products,
    n.e.s. (0.22%)

  Chocolate and other food
    preparations (0.07%)                0.11 (0.72)     0.21 (2.42)

  Clay and refractory construction
    materials (0.19%)

  Cocoa (0.01%)                        -0.25 (2.53)

  Copper (0.41%)

  Cotton (0.01%)

  Cotton fabrics, woven (0.08%)         0.11 (0.65)    -0.22 (1.69)

  Developed cinematographic
    film (0.00%)

  Feeding-stuff for animals,
    excluding unmilled cereals
    (0.01%)                             0.64 (2.38)     0.54 (3.09)

  Fertilizers manufactured (0.01%)

  Fish, fresh and simply preserved
    (0.37%)

  Fish, in airtight containers,
    n.e.s. (0.03%)                      0.11 (1.09)     0.19 (3.02)

  Floor coverings, tapestries, etc.
    (0.01%)                             0.16 (2.83)

  Footwear (O.18%)                      0.12 (3.00)     0.03 (1.50)

  Fruit, fresh, and nuts (excluding
    oil-nuts) (0.99%)

  Glassware (0.26%)                    -0.07 (1.23)

  Hides and skins (excluding fur
    skins), undressed (0.01 %)

  Household equipment of base
    metals (0.39%)

  Inorganic chemical elements,
    oxides, halogen salts (0.17%)

  Jeeselery and gold/silversmiths'
    wares (0.29%)

  Lead (0.01%)                          0.29 (2.94)     0.21 (2.71)

  Leather (0.05%)

  Machinery and appliances-
    nonelectrical (5.32%)

  Made-up articles, wholly or
    chiefly of textile material
    (0.63%)                            -0.20 (2.48)    -0.11 (1.73)

  Manufactured articles, n.e.s.
    (0.42%)                             0.03 (0.36)     0.09 (2.09)

  Manufactures of leather or
    composition leather (0.06%)         0.29 (3.58)     0.13 (2.87)

  Meat, fresh, chilled, or frozen
    (0.03%)

  Medicinal and pharmaceutical
    products (0.42%)

  Metal containers for storage and
    transport (0.09%)                   0.20 (2.10)

  Mineral manufactures, n.e.s.
    (0.24%)

  Miscellaneous nonferrous base
    metals/in metallurgy (0.01%)

  Musical instruments, sound
    recorders (0.57%)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.06%)

  Oil-seeds, oil nuts, and oil
    kernels (0.01%)

  Organic chemicals (0.33%)

  Other crude minerals (0.05%)

  Other electrical machinery
    and apparatus (4.80%)

  Other inorganic chemicals (0.11%)

  Paper and paperboard (0.12%)

  Pearls and precious and
    semiprecious stones (0.00%)

  Perambulators, toys, games, and
    sportinggoods (0.49%)

  Petroleum products (1.55%)

  Pottery (0.04%)

  Power-generating machinery (3.80%)

  Printed matter (0.23%)

  Road motor vehicles (23.08%)

  Sanitary, plumbing, heating and
    lighting fixtures (1.02%)          -0.06 (1.88)

  Scientific, medical, optical,
    meas./co. (4.98%)                  -0.19 (2.88)    -0.11 (2.03)

  Ships and boats (0.06%)

  Special textile fabrics (0.18%)

  Spices (0.03%)                        0.11 (2.38)

  Sugar and honey (0.05%)               0.12 (0.67)     0.20 (1.59)

  Sugar confectionary, excluding
    chocolate (0.24%)

  Sulfur and unroasted iron pyrites
    (0.03%)

  Telecommunications apparatus
    (15.49%)

  Textile fabrics (0.02%)

  Tools for use in the hand or in
    machines (0.10%)

  Travel goods, handbags, and
    similar containers (0.06%)

  Tubes, pipes, and fittings of
    iron (0.37%)                        0.15 (1.49)     0.19 (2.47)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.05%)

  Universals, plates and sheets of
    iron (0.58%)

  Vegetables, roots and tubers,
    preserved (2.26%)

  Wood manufactures, n.e.s. (0.19%)

  Wool and other animal hair (0.00%)

  Works of art, collectors pieces,
    and antiques (0.02%)

  Zinc (0.16%)

                                       Long-Run Coefficient Estimates

Industry (Share of Total
Exports in Parentheses)                    Constant         NAFTA

Total exports                            -1.01 (0.8)      0.21 (1.67)

Industries positively affected
    by volatility (numbers in
    % are export shares)

  Alcoholic beverages (1.51%)            -6.57 (4.69)

  Domestic electrical
    equipment (1.69%)                   -15.71 (2.29)    -2.30 (3.32)

  Food preparations, n.e.s. (0.22%)      -7.82 (4.14)    -0.36 (1.90)

  Glass (0.57%)                         -22.70 (11.30)   -0.64 (2.27)

  Lime, cement, and fabricated
    building material (excluding
    (0.22%) glass)                       -3.75 (1.59)

  Machines for special
    industries (0.50%)                  -10.67 (5.06)

  Manufactures of metal,
    n.e.s. (1.87%)                       -6.85 (3.38)

  Perfumery, cosmetics,
    dentifrices (0.09%)                 -14.10 (4.08)     0.55 (1.77)

  Pigments, paints, varnishes,
    and related materials (0.09%)       -18.96 (8.09)    -1.39 (3.99)

  Tobacco manufactures (0.00%)            8.40 (1.59)

  Veneers, plywood boards, and
    other wood (0.03%)                   13.90 (3.75)

Industries negatively affected
    by volatility

  Animal/vegetable oils and fats,
    processed (0.00%)                   -11.68 (0.97)

  Clothing except fur clothing
    (6.25%)                             -21.24 (2.49)     2.17 (3.62)

  Crude animal materials, n.e.s.
    (0.02%)                               4.56 (2.63)     0.63 (3.53)

  Crude rubber, including synthetic
    and reclaimed (0.10%)
                                        -19.81 (3.01)
  Essential oils, perfume, and
    flavor materials (0.03%)              6.13 (3.36)     0.54 (1.74)

  Fruit, preserved and fruit
    preparations (0.23%)                  2.30 (1.50)     0.77 (3.49)

  Fuel wood and charcoal (0.01%)        -44.45 (3.42)    -2.64 (1.74)

  Furniture (3.89%)                     -25.49 (7.36)

  Iron steel castings, forgings,
    unwork (0.07%)                      -62.08 (2.75)     2.60 (1.86)

  Metalworking machinery (0.03%)        -34.10 (9.09)     0.96 (2.79)

  Nonferrous metal scrap (0.15%)        -29.86 (5.14)

  Office machines (6.90%)               -25.41 (3.41)

  Ores and concentrates of
    nonferrous metals (0.09%)             4.92 (1.83)     0.98 (3.85)

  Soaps, cleansing and polishing
    preparations (0.19%)                -35.29 (6.12)

  Stone, sand, and gravel (0.09%)       -23.99 (5.72)    -1.50 (3.28)

  Textile and leather machinery         -19.98 (3.06)
    (0.21%)

  Textile yarn and thread (0.35%)       -28.35 (2.81)

  Vegetable fibers, except cotton
    and jute (0.00%)                    -73.44 (1.56)

  Vegetables, roots and tubers,
    fresh (0.19%)                        -3.71 (1.50)     0.44 (2.32)

  Wood in the rough or roughly
    square (0.00%)                       -9.09 (1.16)     3.79 (5.16)

  Wood, shaped or simply worked
    (0.09%)

  Industries not affected by
    volatility                          -79.93 (3.31)

  Agricultural machinery and
    implements (0.21%)                   -4.35 (1.48)     0.65 (2.32)

  Articles of artificial plastic
    materials (0.99%)                   -14.84 (4.02)

  Articles of paper, pulp,
    paperboard (0.52%)                    1.75 (0.14)

  Articles of rubber, n.e.s.
    (0.47%)                             -22.12 (1.83)    -2.41 (2.30)

  Chemical materials and products,
    n.e.s. (0.22%)                       -1.60 (0.44)     1.47 (2.54)

  Chocolate and other food
    preparations (0.07%)                 -8.79 (2.79)     0.80 (2.53)

  Clay and refractory construction
    materials (0.19%)                     0.61 (0.45)     0.48 (2.50)

  Cocoa (0.01%)                           8.52 (2.68)

  Copper (0.41%)                        -15.62 (2.65)     1.02 (2.00)

  Cotton (0.01%)                          9.92 (3.40)     1.25 (3.90)

  Cotton fabrics, woven (0.08%)        -252.35 (0.39)

  Developed cinematographic              24.83 (3.31)     2.70 (2.04)
    film (0.00%)

  Feeding-stuff for animals,
    excluding unmilled cereals
    (0.01%)                             323.23 (0.53)

  Fertilizers manufactured (0.01%)     -108.07 (1.04)

  Fish, fresh and simply preserved
    (0.37%)                               8.13 (4.82)

  Fish, in airtight containers,
    n.e.s. (0.03%)                        7.67 (1.41)

  Floor coverings, tapestries, etc.
    (0.01%)                             -21.18 (4.37)

  Footwear (O.18%)                       -4.39 (1.12)

  Fruit, fresh, and nuts (excluding
    oil-nuts) (0.99%)                   -24.89 (1.01)

  Glassware (0.26%)                     -13.57 (4.11)     0.85 (2.03)

  Hides and skins (excluding fur
    skins), undressed (0.01 %)          -55.98 (1.14)

  Household equipment of base
    metals (0.39%)                      330.56 (0.21)

  Inorganic chemical elements,
    oxides, halogen salts (0.17%)        34.30 (0.69)

  Jeeselery and gold/silversmiths'
    wares (0.29%)                        -9.43 (3.36)

  Lead (0.01%)                            9.69 (2.83)

  Leather (0.05%)                       -19.96 (1.95)

  Machinery and appliances-
    nonelectrical (5.32%)               -10.23 (2.27)

  Made-up articles, wholly or
    chiefly of textile material
    (0.63%)                             -20.94 (2.26)

  Manufactured articles, n.e.s.
    (0.42%)                             -15.68 (1.54)     2.10 (2.08)

  Manufactures of leather or
    composition leather (0.06%)         189.78 (0.50)

  Meat, fresh, chilled, or frozen
    (0.03%)                              29.68 (1.94)     5.43 (1.88)

  Medicinal and pharmaceutical
    products (0.42%)                     -1.41 (0.01)

  Metal containers for storage and
    transport (0.09%)                   -16.64 (3.40)

  Mineral manufactures, n.e.s.
    (0.24%)                              -4.56 (1.55)     0.78 (2.41)

  Miscellaneous nonferrous base
    metals/in metallurgy (0.01%)         -3.69 (0.48)

  Musical instruments, sound
    recorders (0.57%)                   -14.54 (1.36)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.06%)       -15.79 (3.70)

  Oil-seeds, oil nuts, and oil
    kernels (0.01%)                       3.85 (1.45)    -0.86 (2.33)

  Organic chemicals (0.33%)             -10.79 (4.42)     1.12 (2.59)

  Other crude minerals (0.05%)            7.13 (2.32)

  Other electrical machinery
    and apparatus (4.80%)                -3.69 (1.94)

  Other inorganic chemicals (0.11%)     -15.55 (5.55)

  Paper and paperboard (0.12%)          -31.51 (13.49)   -0.63 (1.72)

  Pearls and precious and
    semiprecious stones (0.00%)           5.00 (0.79)

  Perambulators, toys, games, and
    sportinggoods (0.49%)                -5.03 (1.20)

  Petroleum products (1.55%)             56.46 (0.66)

  Pottery (0.04%)                        -1.66 (0.27)

  Power-generating machinery (3.80%)    -12.95 (6.99)

  Printed matter (0.23%)                  1.36 (0.72)     1.15 (5.87)

  Road motor vehicles (23.08%)          -24.07 (2.37)

  Sanitary, plumbing, heating and
    lighting fixtures (1.02%)           -54.10 (0.76)

  Scientific, medical, optical,
    meas./co. (4.98%)                   -18.30 (2.66)

  Ships and boats (0.06%)                 3.85 (0.30)

  Special textile fabrics (0.18%)       -87.08 (0.30)

  Spices (0.03%)                        127.00 (0.36)

  Sugar and honey (0.05%)               347.54 (0.33)

  Sugar confectionary, excluding
    chocolate (0.24%)                   -19.10 (4.08)

  Sulfur and unroasted iron pyrites
    (0.03%)                               7.46 (2.66)    -0.73 (1.82)

  Telecommunications apparatus
    (15.49%)                             -7.46 (3.96)

  Textile fabrics (0.02%)               -12.22 (1.84)     2.08 (3.35)

  Tools for use in the hand or in        -7.55 (1.44)
    machines (0.10%)

  Travel goods, handbags, and
    similar containers (0.06%)           -2.51 (0.49)

  Tubes, pipes, and fittings of
    iron (0.37%)                         -0.41 (0.12)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.05%)          -15.12 (2.46)

  Universals, plates and sheets of
    iron (0.58%)                        -94.01 (0.59)

  Vegetables, roots and tubers,
    preserved (2.26%)                    -0.20 (0.14)

  Wood manufactures, n.e.s. (0.19%)       0.37 (0.17)

  Wool and other animal hair (0.00%)   -190.01 (0.70)

  Works of art, collectors pieces,
    and antiques (0.02%)                 28.67 (1.10)

  Zinc (0.16%)                           -1.36 (0.38)

                                       Long-Run Coefficient Estimates

Industry (Share of Total
Exports in Parentheses)                ln [Y.sup.U.S.]       In REX

Total exports                            3.10 (17.32)       0.18 (0.57)

Industries positively affected
    by volatility (numbers in
    % are export shares)

  Alcoholic beverages (1.51%)            3.95 (30.88)      -0.95 (2.32)

  Domestic electrical
    equipment (1.69%)                    8.98 (9.86)       -5.05 (2.55)

  Food preparations, n.e.s. (0.22%)      4.39 (16.27)      -1.88 (3.64)

  Glass (0.57%)                          6.38 (17.24)       1.19 (1.92)

  Lime, cement, and fabricated
    building material (excluding
    (0.22%) glass)                       2.30 (10.27)       0.89 (1.32)

  Machines for special
    industries (0.50%)                   4.70 (16.96)      -0.95 (1.45)

  Manufactures of metal,
    n.e.s. (1.87%)                       4.35 (22.01)      -1.40 (2.35)

  Perfumery, cosmetics,
    dentifrices (0.09%)                  5.51 (11.90)      -2.06 (2.17)

  Pigments, paints, varnishes,
    and related materials (0.09%)        6.87 (15.16)      -2.40 (2.81)

  Tobacco manufactures (0.00%)           0.37 (0.75)       -1.89 (1.15)

  Veneers, plywood boards, and
    other wood (0.03%)                  -0.60 (1.72)       -2.22 (1.65)

Industries negatively affected
    by volatility

  Animal/vegetable oils and fats,
    processed (0.00%)                    0.97 (0.83)        3.18 (1.16)

  Clothing except fur clothing
    (6.25%)                              2.31 (2.78)        7.48 (2.40)

  Crude animal materials, n.e.s.
    (0.02%)                              0.13 (0.56)        0.39 (0.74)

  Crude rubber, including synthetic
    and reclaimed (0.10%)
                                         3.44 (5.04)        4.32 (2.08)
  Essential oils, perfume, and
    flavor materials (0.03%)             0.08 (0.18)       -1.02 (1.18)

  Fruit, preserved and fruit
    preparations (0.23%)                 0.17 (0.58)        1.47 (2.12)

  Fuel wood and charcoal (0.01%)         7.04 (3.58)        7.27 (2.74)

  Furniture (3.89%)                      5.89 (21.83)       3.49 (3.23)

  Iron steel castings, forgings,
    unwork (0.07%)                       4.80 (2.12)       17.28 (2.56)

  Metalworking machinery (0.03%)         4.72 (8.15)        6.84 (6.62)

  Nonferrous metal scrap (0.15%)         4.30 (8.57)        6.78 (4.23)

  Office machines (6.90%)                6.30 (10.40)       2.54 (1.23)

  Ores and concentrates of
    nonferrous metals (0.09%)           -0.94 (2.56)        1.66 (2.37)

  Soaps, cleansing and polishing
    preparations (0.19%)                 7.03 (10.29)       4.35 (2.05)

  Stone, sand, and gravel (0.09%)        5.60 (7.49)        1.92 (1.61)

  Textile and leather machinery          3.68 (5.62)        3.07 (1.41)
    (0.21%)

  Textile yarn and thread (0.35%)        4.74 (5.76)        4.46 (1.75)

  Vegetable fibers, except cotton
    and jute (0.00%)                     5.14 (1.22)       17.67 (1.59)

  Vegetables, roots and tubers,
    fresh (0.19%)                        1.70 (6.15)        1.94 (2.74)

  Wood in the rough or roughly
    square (0.00%)                      -1.65 (1.28)        5.80 (2.66)

  Wood, shaped or simply worked
    (0.09%)

  Industries not affected by
    volatility                           7.48 (5.06)       20.83 (2.71)

  Agricultural machinery and
    implements (0.21%)                   2.95 (7.40)       -1.03 (1.19)

  Articles of artificial plastic
    materials (0.99%)                    5.37 (10.49)      -0.31 (0.25)

  Articles of paper, pulp,
    paperboard (0.52%)                   3.23 (2.61)       -1.80 (0.48)

  Articles of rubber, n.e.s.
    (0.47%)                             10.05 (7.00)       -5.54 (1.39)

  Chemical materials and products,
    n.e.s. (0.22%)                       1.67 (2.27)        0.42 (0.24)

  Chocolate and other food
    preparations (0.07%)                 3.51 (6.74)       -0.83 (1.04)

  Clay and refractory construction
    materials (0.19%)                    1.62 (6.34)       -0.45 (1.02)

  Cocoa (0.01%)                         -1.15 (3.63)        0.59 (0.68)

  Copper (0.41%)                         2.58 (3.37)        4.51 (2.54)

  Cotton (0.01%)                        -1.99 (4.61)        0.99 (1.14)

  Cotton fabrics, woven (0.08%)         14.22 (0.45)       70.90 (0.37)

  Developed cinematographic             -6.49 (3.94)        1.55 (0.39)
    film (0.00%)

  Feeding-stuff for animals,
    excluding unmilled cereals
    (0.01%)                            -24.97 (0.51)      -85.45 (0.54)

  Fertilizers manufactured (0.01%)       5.31 (1.08)       33.64 (1.02)

  Fish, fresh and simply preserved
    (0.37%)                              0.13 (0.68)       -0.15 (0.26)

  Fish, in airtight containers,
    n.e.s. (0.03%)                      -0.14 (0.24)       -0.21 (0.13)

  Floor coverings, tapestries, etc.
    (0.01%)                              3.72 (8.65)        3.91 (2.82)

  Footwear (O.18%)                       1.81 (5.96)        1.58 (1.27)

  Fruit, fresh, and nuts (excluding
    oil-nuts) (0.99%)                    3.93 (2.22)        6.64 (0.91)

  Glassware (0.26%)                      2.36 (3.38)        4.27 (3.42)

  Hides and skins (excluding fur
    skins), undressed (0.01 %)           5.12 (1.17)       13.56 (0.85)

  Household equipment of base
    metals (0.39%)                       5.13 (0.70)     -145.75 (0.22)

  Inorganic chemical elements,
    oxides, halogen salts (0.17%)       -0.25 (0.09)      -10.95 (0.66)

  Jeeselery and gold/silversmiths'
    wares (0.29%)                        4.20 (12.13)      -0.84 (0.91)

  Lead (0.01%)                          -1.11 (3.14)        0.16 (0.17)

  Leather (0.05%)                        3.57 (4.28)        2.77 (0.78)

  Machinery and appliances-
    nonelectrical (5.32%)                4.76 (6.41)       -0.33 (0.26)

  Made-up articles, wholly or
    chiefly of textile material
    (0.63%)                              5.14 (4.62)        3.10 (0.97)

  Manufactured articles, n.e.s.
    (0.42%)                              2.05 (1.40)        5.39 (1.40)

  Manufactures of leather or
    composition leather (0.06%)          8.27 (0.71)      -82.04 (0.51)

  Meat, fresh, chilled, or frozen
    (0.03%)                             -7.81 (2.30)        2.20 (0.26)

  Medicinal and pharmaceutical
    products (0.42%)                    -32.29 (0.12)      50.09 (0.12)

  Metal containers for storage and
    transport (0.09%)                    4.42 (10.41)       1.31 (0.87)

  Mineral manufactures, n.e.s.
    (0.24%)                              2.68 (5.43)       -0.42 (0.53)

  Miscellaneous nonferrous base
    metals/in metallurgy (0.01%)         0.32 (0.46)        2.36 (1.03)

  Musical instruments, sound
    recorders (0.57%)                    3.14 (2.59)        3.71 (0.78)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.06%)        4.01 (8.71)        1.45 (0.99)

  Oil-seeds, oil nuts, and oil
    kernels (0.01%)                      0.46 (0.84)       -0.22 (0.28)

  Organic chemicals (0.33%)              2.19 (3.91)        3.71 (3.11)

  Other crude minerals (0.05%)          -0.56 (1.67)        0.34 (0.39)

  Other electrical machinery
    and apparatus (4.80%)                3.11 (11.65)      -0.18 (0.29)

  Other inorganic chemicals (0.11%)      3.85 (14.11)       2.29 (2.56)

  Paper and paperboard (0.12%)           6.02 (12.76)       5.18 (5.37)

  Pearls and precious and
    semiprecious stones (0.00%)          1.05 (1.35)       -2.54 (1.27)

  Perambulators, toys, games, and
    sportinggoods (0.49%)                2.93 (5.27)        0.21 (0.16)

  Petroleum products (1.55%)             2.63 (0.94)      -22.25 (0.71)

  Pottery (0.04%)                        2.06 (2.12)       -0.52 (0.28)

  Power-generating machinery (3.80%)     4.34 (15.29)       1.99 (3.42)

  Printed matter (0.23%)                 1.26 (4.76)       -0.44 (0.80)

  Road motor vehicles (23.08%)           7.19 (4.80)        1.69 (0.48)

  Sanitary, plumbing, heating and
    lighting fixtures (1.02%)            5.82 (2.17)       14.24 (0.59)

  Scientific, medical, optical,
    meas./co. (4.98%)                    5.99 (6.44)        0.68 (0.31)

  Ships and boats (0.06%)                2.08 (1.59)       -1.99 (0.40)

  Special textile fabrics (0.18%)       12.93 (0.35)       15.02 (0.27)

  Spices (0.03%)                        -5.84 (0.28)      -43.35 (0.37)

  Sugar and honey (0.05%)              -36.23 (0.33)      -64.56 (0.31)

  Sugar confectionary, excluding
    chocolate (0.24%)                    6.63 (11.43)      -1.62 (1.11)

  Sulfur and unroasted iron pyrites
    (0.03%)                             -0.52 (0.99)        0.71 (0.89)

  Telecommunications apparatus
    (15.49%)                             4.22 (15.34)      -0.09 (0.15)

  Textile fabrics (0.02%)                2.44 (2.65)        2.30 (1.09)

  Tools for use in the hand or in        2.80 (4.00)        0.63 (0.37)
    machines (0.10%)

  Travel goods, handbags, and
    similar containers (0.06%)           1.68 (2.09)        0.29 (0.17)

  Tubes, pipes, and fittings of
    iron (0.37%)                         2.08 (5.94)       -0.57 (0.63)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.05%)           5.76 (8.67)       -2.42 (1.08)

  Universals, plates and sheets of
    iron (0.58%)                         5.54 (0.65)       39.21 (0.53)

  Vegetables, roots and tubers,
    preserved (2.26%)                    2.13 (15.09)      -0.89 (1.98)

  Wood manufactures, n.e.s. (0.19%)      1.77 (7.36)       -0.65 (0.95)

  Wool and other animal hair (0.00%)     3.35 (0.47)       74.40 (0.69)

  Works of art, collectors pieces,
    and antiques (0.02%)                -0.48 (0.19)      -10.11 (0.99)

  Zinc (0.16%)                           2.13 (6.44)       -0.43 (0.41)

                                       Long-Run Coefficient
                                            Estimates

Industry (Share of Total
Exports in Parentheses)                   ln VOL

Total exports                          -0.06 (0.67)

Industries positively affected
    by volatility (numbers in
    % are export shares)

  Alcoholic beverages (1.51%)           0.22 (2.06)

  Domestic electrical
    equipment (1.69%)                   1.47 (3.05)

  Food preparations, n.e.s. (0.22%)     0.47 (3.78)

  Glass (0.57%)                         0.23 (1.84)

  Lime, cement, and fabricated
    building material (excluding
    (0.22%) glass)                      0.80 (4.41)

  Machines for special
    industries (0.50%)                  0.23 (1.75)

  Manufactures of metal,
    n.e.s. (1.87%)                      0.38 (2.48)

  Perfumery, cosmetics,
    dentifrices (0.09%)                 0.44 (1.72)

  Pigments, paints, varnishes,
    and related materials (0.09%)       0.29 (2.08)

  Tobacco manufactures (0.00%)          0.64 (1.77)

  Veneers, plywood boards, and
    other wood (0.03%)                  0.42 (2.24)

Industries negatively affected
    by volatility

  Animal/vegetable oils and fats,
    processed (0.00%)                  -1.94 (2.10)

  Clothing except fur clothing
    (6.25%)                            -1.74 (2.35)

  Crude animal materials, n.e.s.
    (0.02%)                            -0.27 (2.09)

  Crude rubber, including synthetic
    and reclaimed (0.10%)
                                       -0.75 (2.11)
  Essential oils, perfume, and
    flavor materials (0.03%)           -0.23 (1.98)

  Fruit, preserved and fruit
    preparations (0.23%)               -0.18 (2.35)

  Fuel wood and charcoal (0.01%)       -1.88 (2.42)

  Furniture (3.89%)                    -0.66 (2.78)

  Iron steel castings, forgings,
    unwork (0.07%)                     -4.13 (2.38)

  Metalworking machinery (0.03%)       -1.33 (4.95)

  Nonferrous metal scrap (0.15%)       -1.77 (4.32)

  Office machines (6.90%)              -1.10 (1.67)

  Ores and concentrates of
    nonferrous metals (0.09%)          -0.61 (3.09)

  Soaps, cleansing and polishing
    preparations (0.19%)               -0.80 (1.80)

  Stone, sand, and gravel (0.09%)      -1.02 (3.17)

  Textile and leather machinery        -0.74 (1.86)
    (0.21%)

  Textile yarn and thread (0.35%)      -1.66 (2.51)

  Vegetable fibers, except cotton
    and jute (0.00%)                   -6.67 (2.20)

  Vegetables, roots and tubers,
    fresh (0.19%)                      -0.64 (3.33)

  Wood in the rough or roughly
    square (0.00%)                     -1.19 (2.31)

  Wood, shaped or simply worked
    (0.09%)

  Industries not affected by
    volatility                         -3.40 (2.83)

  Agricultural machinery and
    implements (0.21%)                  0.27 (1.26)

  Articles of artificial plastic
    materials (0.99%)                   0.10 (0.44)

  Articles of paper, pulp,
    paperboard (0.52%)                  0.00 (0.00)

  Articles of rubber, n.e.s.
    (0.47%)                             1.35 (1.48)

  Chemical materials and products,
    n.e.s. (0.22%)                      0.09 (0.31)

  Chocolate and other food
    preparations (0.07%)               -0.30 (1.36)

  Clay and refractory construction
    materials (0.19%)                  -0.06 (0.84)

  Cocoa (0.01%)                         0.28 (1.08)

  Copper (0.41%)                       -0.64 (1.59)

  Cotton (0.01%)                       -0.23 (1.09)

  Cotton fabrics, woven (0.08%)       -13.59 (0.40)

  Developed cinematographic            -0.88 (1.18)
    film (0.00%)

  Feeding-stuff for animals,
    excluding unmilled cereals
    (0.01%)                            10.23 (0.43)

  Fertilizers manufactured (0.01%)     -9.57 (1.03)

  Fish, fresh and simply preserved
    (0.37%)                             0.00 (0.01)

  Fish, in airtight containers,
    n.e.s. (0.03%)                      0.69 (1.21)

  Floor coverings, tapestries, etc.
    (0.01%)                            -0.30 (0.84)

  Footwear (O.18%)                     -0.21 (0.61)

  Fruit, fresh, and nuts (excluding
    oil-nuts) (0.99%)                  -1.21 (1.04)

  Glassware (0.26%)                    -0.29 (1.15)

  Hides and skins (excluding fur
    skins), undressed (0.01 %)          1.66 (0.54)

  Household equipment of base
    metals (0.39%)                     12.59 (0.21)

  Inorganic chemical elements,
    oxides, halogen salts (0.17%)       1.87 (0.71)

  Jeeselery and gold/silversmiths'
    wares (0.29%)                       0.21 (1.25)

  Lead (0.01%)                         -0.13 (0.46)

  Leather (0.05%)                      -0.37 (0.91)

  Machinery and appliances-
    nonelectrical (5.32%)               0.05 (0.22)

  Made-up articles, wholly or
    chiefly of textile material
    (0.63%)                             0.05 (0.07)

  Manufactured articles, n.e.s.
    (0.42%)                            -0.42 (0.67)

  Manufactures of leather or
    composition leather (0.06%)        15.53 (0.53)

  Meat, fresh, chilled, or frozen
    (0.03%)                            -1.51 (1.44)

  Medicinal and pharmaceutical
    products (0.42%)                  -12.42 (0.13)

  Metal containers for storage and
    transport (0.09%)                  -0.31 (0.84)

  Mineral manufactures, n.e.s.
    (0.24%)                            -0.10 (0.76)

  Miscellaneous nonferrous base
    metals/in metallurgy (0.01%)       -0.12 (0.19)

  Musical instruments, sound
    recorders (0.57%)                  -0.62 (0.81)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.06%)      -0.15 (0.71)

  Oil-seeds, oil nuts, and oil
    kernels (0.01%)                     0.10 (0.75)

  Organic chemicals (0.33%)            -0.03 (0.19)

  Other crude minerals (0.05%)         -0.44 (1.21)

  Other electrical machinery
    and apparatus (4.80%)              -0.07 (0.61)

  Other inorganic chemicals (0.11%)    -0.08 (0.39)

  Paper and paperboard (0.12%)         -0.02 (0.18)

  Pearls and precious and
    semiprecious stones (0.00%)         0.26 (0.68)

  Perambulators, toys, games, and
    sportinggoods (0.49%)               0.06 (0.24)

  Petroleum products (1.55%)            3.40 (0.73)

  Pottery (0.04%)                       0.26 (0.76)

  Power-generating machinery (3.80%)    0.12 (1.12)

  Printed matter (0.23%)               -0.20 (1.49)

  Road motor vehicles (23.08%)          0.14 (0.23)

  Sanitary, plumbing, heating and
    lighting fixtures (1.02%)          -3.61 (0.62)

  Scientific, medical, optical,
    meas./co. (4.98%)                   0.13 (0.20)

  Ships and boats (0.06%)               0.25 (0.42)

  Special textile fabrics (0.18%)      -5.01 (0.34)

  Spices (0.03%)                        0.32 (0.07)

  Sugar and honey (0.05%)              17.92 (0.30)

  Sugar confectionary, excluding
    chocolate (0.24%)                   0.09 (0.31)

  Sulfur and unroasted iron pyrites
    (0.03%)                             0.18 (0.99)

  Telecommunications apparatus
    (15.49%)                            0.10 (0.90)

  Textile fabrics (0.02%)              -0.45 (1.12)

  Tools for use in the hand or in      -0.14 (0.43)
    machines (0.10%)

  Travel goods, handbags, and
    similar containers (0.06%)         -0.05 (0.15)

  Tubes, pipes, and fittings of
    iron (0.37%)                        0.13 (0.44)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.05%)          0.24 (0.67)

  Universals, plates and sheets of
    iron (0.58%)                        3.00 (0.36)

  Vegetables, roots and tubers,
    preserved (2.26%)                  -0.05 (0.33)

  Wood manufactures, n.e.s. (0.19%)    -0.01 (0.08)

  Wool and other animal hair (0.00%)   -6.47 (0.74)

  Works of art, collectors pieces,
    and antiques (0.02%)               -0.09 (0.06)

  Zinc (0.16%)                          0.16 (0.59)

Table 4. Short-Run and Long-Run Coefficient Estimates, Mexican
Import Equation (Absolute Value of t Ratios in Parentheses)

                                      Short-Run Coefficient Estimates

Industry (Share of Total                [DELTA]ln       [DELTA]ln
Imports in Parentheses)                [VOL.sub.t]    [VOL.sub.t-1]

Total imports                          0.01 (0.71)    0.005 (0.12)

Positively affected by
    volatility (numbers in
    % are import shares)

  Fuel wood and charcoal (0.00%)      -0.14 (1.09)    -0.32 (2.54)

  Lead (0.03%)                         0.50 (4.49)

  Manufactures of metal,
    n.e.s. (2.88%)                    -0.02 (0.30)

  Metalworking machinery (0.31%)       0.12 (2.15)

  Miscellaneous nonferrous base
    metals/ metallurgy (0.05%)         0.14 (1.88)

  Nonferrous metal scrap (0.07%)      -0.02 (0.17)    -0.48 (3.64)

  Oil-seeds, oil nuts, and
    oil kernels (1.17%)                0.37 (2.36)

  Ships and boats (0.13%)              0.49 (2.86)

  Tubes, pipes, and fittings of
    iron (0.32%)                       0.08 (1.17)    -0.17 (2.23)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.33%)         0.06 (0.61)    -0.22 (2.21)

  Wool and other animal
    hair (0.01%)                      -0.29 (2.40)    -0.27 (1.43)

Negatively affected by volatility

  Articles of paper, pulp,
    paperboard (1.34%)                 0.09 (3.10)     0.26 (3.99)

  Chemical materials and
    products, n.e.s. (1.33%)          -0.06 (2.66)

  Copper (0.82%)                       0.05 (0.53)     0.40 (2.67)

  Cotton (0.60%)                      -0.39 (4.18)     0.46 (2.07)

  Feeding-stuff for animals,
    excluding unmilled cereal
    (0.54%)                           -0.31 (2.99)

  Fruit, preserved and fruit
    preparations (0.08%)              -0.27 (3.22)     0.35 (2.41)

  Furniture (0.95%)                   -0.04 (0.79)

  Glass (0.50%)                       -0.09 (1.15)     0.12 (1.70)

  Metal containers for storage
    and transport (0.12%)             -0.04 (0.57)     0.30 (2.71)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.51%)     -0.08 (1.26)

  Office machines (9.73%)             -0.06 (1.23)     0.08 (0.97)

  Other crude minerals (0.11%)        -0.10 (1.90)

  Paper and paperboard (1.27%)        -0.04 (0.78)     0.11 (2.41)

  Power-generating machinery
    (3.76%)                           -0.08 (1.97)

  Printed matter (0.71%)              -0.02 (0.32)     0.13 (1.56)

  Special textile fabrics (1.05%)     -0.23 (3.17)

  Sugar and honey (0.10%)             -0.13 (0.48)     1.27 (2.61)

  Vegetables, roots and tubers,
    fresh (0.10%)                     -0.12 (1.02)     0.50 (2.15)

  Vegetables, roots and tubers,
    preserved (0.22%)                 -0.17 (2.05)

  Wood in the rough or roughly
    square (0.03%)                    -0.38 (3.23)

  Works of art, collectors
    pieces, and antiques(0.11%)        0.56 (4.35)     0.72 (2.97)

  Zinc (0.03%)                        -0.07 (0.81)     0.44 (2.74)

Not affected by volatility

  Agricultural machinery and
    implements (0.31%)                 0.02 (0.32)    -0.23 (1.88)

  Alcoholic beverages (0.11%)         -0.01 (0.06)

  Animal/vegetable oils and fats,
    processed (0.09%)                  0.05 (0.40)    -0.06 (0.27)

  Articles of artificial plastic
    materials (3.86%)                  0.04 (0.91)    -0.12 (1.28)

  Articles of rubber, n.e.s.
    (1.14%)                           -0.08 (1.21)

  Chocolate and other food
    preparations (0.09%)              -0.10 (0.70)    -0.23 (1.63)

  Clay and refractory
    construction materials (0.04%)     0.01 (0.19)

  Clothing except fur clothing
    (1.54%)                            0.01 (0.45)

  Cocoa (0.04%)                        0.18 (0.70)     0.48 (1.85)

  Cotton Fabrics, woven (0.87%)        0.00 (0.02)

  Crude animal materials, n.e.s.
    (0.24%)                            0.02 (0.42)     0.12 (3.29)

  Crude rubber, including synthetic
    and reclaimed (0.16%)              0.11 (2.45)     0.20 (2.58)

  Developed cinematographic film
    (0.00%)                           -0.24 (2.83)    -0.50 (3.51)

  Domestic electrical equipment
    (0.49%)                            0.13 (1.87)     0.19 (2.69)

  Essential oils, perfume, and
    flavor materials (0.15%)           0.01 (0.26)

  Fertilizers manufactured (0.37%)
                                      -0.04 (0.48)    -0.01 (0.09)
  Fish, fresh and simply preserved
    (0.05%)                            0.01 (0.11)     0.01 (0.08)

  Fish, in airtight containers,
    n.e.s. (0.04%)                    -0.03 (0.35)

  Floor coverings, tapestries,
    etc. (0.12%)                      -0.04 (0.82)    -0.14 (1.18)

  Food preparations, n.e.s. (0.71%)    0.17 (2.65)

  Footwear (0.05%)                     0.18 (2.14)

  Fruit, fresh, and nuts
    (excluding oil-nuts) (0.30%)      -0.03 (0.35)

  Glassware (0.06%)                   -0.04 (0.65)

  Hides and skins (excluding fur
    skins), undressed (0.13%)          0.00 (0.32)    -0.02 (2.07)

  Household equipment of base
    metals (0.04%)                     0.01 (0.14)

  Inorganic chemical elements,
    oxides, halogen salts (0.22%)     -0.06 (1.86)

  Iron steel castings, forgings,
    unwork (0.10%)                     0.12 (0.84)

  Jewelery and gold/silversmiths'
    wares (0.34%)                     -0.22 (2.80)    -0.41 (4.28)

  Leather (0.65%)                     -0.13 (1.85)

  Lime, cement and fabricated
    building material (excluding
    glass) (0.03%)                     0.05 (0.86)     0.02 (0.17)

  Machinery and appliances-
    nonelectrical (7.45%)             -0.04 (1.37)    -0.03 (0.70)

  Machines for special industries
    (0.94%)                            0.05 (1.23)     0.03 (0.49)

  Made-up articles, wholly or
    chiefly of textile materials
    (0.11%)                           -0.04 (0.52)

  Manufactured articles, n.e.s.
    (0.28%)                           -0.04 (0.37)    -0.20 (1.60)

  Manufactures of leather or
    composition leather (0.13%)       -0.05 (0.52)

  Meat, fresh, chilled, or frozen
    (1.40%)                            0.14 (2.59)

  Medicinal and pharmaceutical
    products (0.75%)                   0.03 (0.94)    -0.11 (3.06)

  Mineral manufactures, n.e.s.
    (0.28%)                           -0.01 (0.30)

  Musical instruments, sound
    recorders (0.88%)                  0.04 (0.90)

  Ores and concentrates of
    nonferrous metals (0.09%)         -0.10 (0.83)

  Organic chemicals (3.96%)           -0.02 (0.56)     0.03 (0.48)

  Other electrical machinery and
    apparatus (11.52%)                 0.00 (0.10)

  Other inorganic chemicals (0.34%)   -0.04 (1.16)

  Pearls and precious and
    semiprecious stones (0.17%)       -0.04 (0.27)

  Perambulators, toys, games,
    sporting goods (0.29%)             0.07 (1.00)     0.28 (2.34)

  Perfumery, cosmetics,
    dentifrices (0.32%)                0.09 (1.45)     0.06 (0.53)

  Petroleum products (3.36%)           0.09 (1.09)     0.28 (1.67)

  Pigments, paints, varnishes,
    and related materials (0.59%)     -0.03 (0.57)

  Pottery (0.01%)                      0.08 (0.81)

  Road motor vehicles (12.58%)        -0.04 (1.27)     0.03 (0.51)

  Sanitary, plumbing, heating and
    lighting fixtures (0.16%)          0.06 (0.77)

  Scientific, medical, optical,
    meas./co (4.15%)                  -0.01 (0.22)

  Soaps, cleansing and polishing
    preparations (0.20%)              -0.11 (1.92)

  Spices (0.01%)                      -0.02 (0.22)

  Stone, sand, and gravel (0.02%)      0.11 (1.12)

  Sugar confectionary, excluding
    chocolate (0.04%)                  0.04 (0.40)

  Sulfur and unroasted iron
    pyrites (0.00%)                    0.00 (0.01)

  Telecommunications apparatus
    (4.62%)                           -0.03 (0.77)

  Textile and leather machinery
    (1.46%)                           -0.01 (0.25)     0.04 (0.37)

  Textile fabrics (0.19%)              0.08 (1.35)

  Textile yarn and thread (0.37%)      0.02 (0.32)

  Tobacco manufactures (0.01%)         0.03 (0.27)     0.39 (1.60)

  Tools for use in the hand or in
    machines (0.32%)                  -0.06 (1.48)

  Travel goods, handbags, and
    similar containers (0.03%)        -0.20 (2.55)     0.01 (0.06)

  Universals, plates and sheets
    of iron (0.84%)                    0.06 (0.85)    -0.11 (0.67)

  Vegetable fibers, except cotton
    and jute (0.00%)                   0.02 (0.14)

  Veneers, plywood boards, and
    other wood (0.15%)                 0.01 (0.27)    -0.22 (2.30)

  Wood manufactures, n.e.s. (0.14%)
                                       0.03 (0.43)
  Wood, shaped or simply
    worked (0.27%)                    -0.02 (0.55)    -0.06 (0.72)

                                      Short-Run Coefficient Estimates

Industry (Share of Total                [DELTA]ln       [DELTA]ln
Imports in Parentheses)               [VOL.sub.t-2]   [VOL.sub.t-3]

Total imports                         0.008 (0.23)    -0.03 (1.56)

Positively affected by
    volatility (numbers in
    % are import shares)

  Fuel wood and charcoal (0.00%)

  Lead (0.03%)

  Manufactures of metal,
    n.e.s. (2.88%)

  Metalworking machinery (0.31%)

  Miscellaneous nonferrous base
    metals/ metallurgy (0.05%)

  Nonferrous metal scrap (0.07%)      -0.20 (2.06)

  Oil-seeds, oil nuts, and
    oil kernels (1.17%)

  Ships and boats (0.13%)

  Tubes, pipes, and fittings of
    iron (0.32%)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.33%)

  Wool and other animal
    hair (0.01%)                      -0.13 (0.83)     0.14 (1.26)

Negatively affected by volatility

  Articles of paper, pulp,
    paperboard (1.34%)                 0.14 (2.53)     0.04 (1.31)

  Chemical materials and
    products, n.e.s. (1.33%)

  Copper (0.82%)                       0.13 (1.53)

  Cotton (0.60%)                       0.63 (3.62)     0.23 (2.42)

  Feeding-stuff for animals,
    excluding unmilled cereal
    (0.54%)

  Fruit, preserved and fruit
    preparations (0.08%)               0.12 (1.33)

  Furniture (0.95%)

  Glass (0.50%)

  Metal containers for storage
    and transport (0.12%)              0.11 (1.77)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.51%)

  Office machines (9.73%)             -0.02 (0.29)    -0.06 (1.55)

  Other crude minerals (0.11%)

  Paper and paperboard (1.27%)

  Power-generating machinery
    (3.76%)

  Printed matter (0.71%)               0.15 (3.06)

  Special textile fabrics (1.05%)

  Sugar and honey (0.10%)              0.57 (1.99)

  Vegetables, roots and tubers,
    fresh (0.10%)                      0.38 (1.98)    -0.14 (1.16)

  Vegetables, roots and tubers,
    preserved (0.22%)

  Wood in the rough or roughly
    square (0.03%)

  Works of art, collectors
    pieces, and antiques(0.11%)        0.98 (5.89)     0.44 (2.81)

  Zinc (0.03%)                         0.18 (1.88)

Not affected by volatility

  Agricultural machinery and
    implements (0.31%)                -0.20 (1.97)    -0.15 (2.32)

  Alcoholic beverages (0.11%)

  Animal/vegetable oils and fats,
    processed (0.09%)                  0.29 (2.04)

  Articles of artificial plastic
    materials (3.86%)                 -0.18 (2.73)    -0.13 (3.47)

  Articles of rubber, n.e.s.
    (1.14%)


  Chocolate and other food
    preparations (0.09%)

  Clay and refractory
    construction materials (0.04%)

  Clothing except fur clothing
    (1.54%)

  Cocoa (0.04%)

  Cotton Fabrics, woven (0.87%)

  Crude animal materials, n.e.s.
    (0.24%)

  Crude rubber, including synthetic
    and reclaimed (0.16%)              0.06 (1.23)

  Developed cinematographic film
    (0.00%)                           -0.25 (2.82)    -0.18 (2.86)

  Domestic electrical equipment
    (0.49%)

  Essential oils, perfume, and
    flavor materials (0.15%)

  Fertilizers manufactured (0.37%)
                                       0.11 (1.31)
  Fish, fresh and simply preserved
    (0.05%)                           -0.08 (1.12)     0.10 (1.61)

  Fish, in airtight containers,
    n.e.s. (0.04%)

  Floor coverings, tapestries,
    etc. (0.12%)                      -0.06 (0.60)    -0.10 (1.73)

  Food preparations, n.e.s. (0.71%)

  Footwear (0.05%)

  Fruit, fresh, and nuts
    (excluding oil-nuts) (0.30%)

  Glassware (0.06%)

  Hides and skins (excluding fur
    skins), undressed (0.13%)

  Household equipment of base
    metals (0.04%)

  Inorganic chemical elements,
    oxides, halogen salts (0.22%)

  Iron steel castings, forgings,
    unwork (0.10%)

  Jewelery and gold/silversmiths'
    wares (0.34%)                     -0.23 (3.66)

  Leather (0.65%)

  Lime, cement and fabricated
    building material (excluding
    glass) (0.03%)                     0.15 (2.33)

  Machinery and appliances-
    nonelectrical (7.45%)             -0.01 (0.36)    -0.04 (2.17)

  Machines for special industries
    (0.94%)                            0.07 (1.58)

  Made-up articles, wholly or
    chiefly of textile materials
    (0.11%)

  Manufactured articles, n.e.s.
    (0.28%)                           -0.24 (3.04)

  Manufactures of leather or
    composition leather (0.13%)

  Meat, fresh, chilled, or frozen
    (1.40%)

  Medicinal and pharmaceutical
    products (0.75%)

  Mineral manufactures, n.e.s.
    (0.28%)

  Musical instruments, sound
    recorders (0.88%)

  Ores and concentrates of
    nonferrous metals (0.09%)

  Organic chemicals (3.96%)           -0.04 (1.20)

  Other electrical machinery and
    apparatus (11.52%)

  Other inorganic chemicals (0.34%)

  Pearls and precious and
    semiprecious stones (0.17%)

  Perambulators, toys, games,
    sporting goods (0.29%)             0.09 (1.24)     0.09 (1.89)

  Perfumery, cosmetics,
    dentifrices (0.32%)                0.12 (1.65)

  Petroleum products (3.36%)           0.36 (3.00)     0.11 (1.49)

  Pigments, paints, varnishes,
    and related materials (0.59%)

  Pottery (0.01%)

  Road motor vehicles (12.58%)         0.05 (1.54)

  Sanitary, plumbing, heating and
    lighting fixtures (0.16%)

  Scientific, medical, optical,
    meas./co (4.15%)

  Soaps, cleansing and polishing
    preparations (0.20%)

  Spices (0.01%)

  Stone, sand, and gravel (0.02%)

  Sugar confectionary, excluding
    chocolate (0.04%)

  Sulfur and unroasted iron
    pyrites (0.00%)

  Telecommunications apparatus
    (4.62%)

  Textile and leather machinery
    (1.46%)                           -0.01 (0.09)    -0.07 (1.44)

  Textile fabrics (0.19%)

  Textile yarn and thread (0.37%)

  Tobacco manufactures (0.01%)         0.50 (2.46)     0.14 (1.12)

  Tools for use in the hand or in
    machines (0.32%)

  Travel goods, handbags, and
    similar containers (0.03%)        -0.08 (0.64)    -0.24 (3.02)

  Universals, plates and sheets
    of iron (0.84%)                   -0.07 (0.53)    -0.24 (3.10)

  Vegetable fibers, except cotton
    and jute (0.00%)

  Veneers, plywood boards, and
    other wood (0.15%)                -0.21 (2.86)    -0.05 (1.23)

  Wood manufactures, n.e.s. (0.14%)

  Wood, shaped or simply
    worked (0.27%)                    -0.12 (2.48)    -0.12 (3.81)

                                      Long-Run Coefficient Estimates

Industry (Share of Total                 Constant         NAFTA
Imports in Parentheses)

Total imports                           4.83 (1.13)    0.84 (4.19)

Positively affected by
    volatility (numbers in
    % are import shares)

  Fuel wood and charcoal (0.00%)        6.73 (2.24)    -0.82 (4.1)

  Lead (0.03%)                        -16.06 (3.02)    1.50 (3.36)

  Manufactures of metal,
    n.e.s. (2.88%)                     -7.23 (1.13)

  Metalworking machinery (0.31%)        2.94 (1.65)    0.47 (3.73)

  Miscellaneous nonferrous base
    metals/ metallurgy (0.05%)          8.84 (1.91)

  Nonferrous metal scrap (0.07%)       -1.10 (0.16)

  Oil-seeds, oil nuts, and
    oil kernels (1.17%)                -4.76 (1.27)    -0.93 (3.1)

  Ships and boats (0.13%)              16.92 (4.45)

  Tubes, pipes, and fittings of
    iron (0.32%)                        7.84 (3.29)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.33%)          1.81 (0.41)    0.79 (3.60)

  Wool and other animal
    hair (0.01%)                       -4.98 (0.87)

Negatively affected by volatility

  Articles of paper, pulp,
    paperboard (1.34%)                -18.05 (3.54)

  Chemical materials and
    products, n.e.s. (1.33%)            7.02 (2.13)    0.87 (5.13)

  Copper (0.82%)                      -15.85 (3.34)

  Cotton (0.60%)                      -60.71 (2.29)

  Feeding-stuff for animals,
    excluding unmilled cereal
    (0.54%)                            -0.54 (0.31)    0.55 (2.53)

  Fruit, preserved and fruit
    preparations (0.08%)               -7.80 (1.60)    1.14 (4.83)

  Furniture (0.95%)                   -24.04 (3.67)

  Glass (0.50%)                       -20.41 (2.20)    1.04 (2.44)

  Metal containers for storage
    and transport (0.12%)             -10.33 (1.60)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.51%)     -11.18 (1.64)    1.13 (2.50)

  Office machines (9.73%)              -7.14 (1.32)    1.15 (4.04)

  Other crude minerals (0.11%)          3.29 (1.96)    0.19 (2.56)

  Paper and paperboard (1.27%)         -3.26 (0.70)    1.02 (4.43)

  Power-generating machinery
    (3.76%)                            -0.81 (0.59)    0.43 (3.48)

  Printed matter (0.71%)               -7.46 (0.96)    1.17 (2.53)

  Special textile fabrics (1.05%)      -7.60 (3.34)    0.92 (6.16)

  Sugar and honey (0.10%)              -27.7 (3.95)

  Vegetables, roots and tubers,
    fresh (0.10%)                      -2.95 (0.96)

  Vegetables, roots and tubers,
    preserved (0.22%)                  -2.16 (0.37)    1.29 (3.45)

  Wood in the rough or roughly
    square (0.03%)                     -1.60 (0.72)    1.24 (6.17)

  Works of art, collectors
    pieces, and antiques(0.11%)        -14.6 (4.58)   -0.74 (4.2)

  Zinc (0.03%)                         -25.7 (5.07)    1.06 (3.50)

Not affected by volatility

  Agricultural machinery and
    implements (0.31%)                 13.60 (4.08)    -0.29 (3.2)

  Alcoholic beverages (0.11%)           7.11 (0.81)    1.90 (2.26)

  Animal/vegetable oils and fats,
    processed (0.09%)                   0.39 (0.06)    1.25 (4.42)

  Articles of artificial plastic
    materials (3.86%)                 -12.12 (0.55)

  Articles of rubber, n.e.s.
    (1.14%)                           -10.77 (3.38)    0.82 (3.03)

  Chocolate and other food
    preparations (0.09%)              -24.10 (1.79)    1.94 (2.00)

  Clay and refractory
    construction materials (0.04%)      1.44 (1.30)    0.32 (2.69)

  Clothing except fur clothing
    (1.54%)                             8.09 (1.96)    0.93 (3.57)

  Cocoa (0.04%)                       -30.13 (0.69)    5.29 (2.07)

  Cotton Fabrics, woven (0.87%)        -3.39 (0.95)    2.81 (5.93)

  Crude animal materials, n.e.s.
    (0.24%)                           -10.19 (0.86)    1.40 (2.42)

  Crude rubber, including synthetic
    and reclaimed (0.16%)               2.91 (0.48)

  Developed cinematographic film
    (0.00%)                            15.39 (1.89)

  Domestic electrical equipment
    (0.49%)                           -15.15 (1.99)

  Essential oils, perfume, and
    flavor materials (0.15%)           14.63 (1.22)

  Fertilizers manufactured (0.37%)
                                        0.45 (0.10)
  Fish, fresh and simply preserved
    (0.05%)                            13.43 (1.96)

  Fish, in airtight containers,
    n.e.s. (0.04%)                      5.08 (0.83)    1.47 (2.55)

  Floor coverings, tapestries,
    etc. (0.12%)                        3.74 (0.03)

  Food preparations, n.e.s. (0.71%)     6.55 (0.07)

  Footwear (0.05%)                     -6.13 (0.70)

  Fruit, fresh, and nuts
    (excluding oil-nuts) (0.30%)        5.08 (0.83)    1.47 (2.55)

  Glassware (0.06%)                    -8.42 (0.95)

  Hides and skins (excluding fur
    skins), undressed (0.13%)           8.43 (3.67)

  Household equipment of base
    metals (0.04%)                     -0.52 (0.05)

  Inorganic chemical elements,
    oxides, halogen salts (0.22%)       5.04 (4.72)    0.22 (1.86)

  Iron steel castings, forgings,
    unwork (0.10%)                      9.96 (0.49)

  Jewelery and gold/silversmiths'
    wares (0.34%)                       6.72 (0.69)    1.73 (2.19)

  Leather (0.65%)                      -5.82 (1.71)    1.64 (2.24)

  Lime, cement and fabricated
    building material (excluding
    glass) (0.03%)                     -0.82 (0.23)

  Machinery and appliances-
    nonelectrical (7.45%)               5.29 (2.21)    0.77 (5.93)

  Machines for special industries
    (0.94%)                             3.33 (1.52)

  Made-up articles, wholly or
    chiefly of textile materials
    (0.11%)                           -26.47 (1.89)

  Manufactured articles, n.e.s.
    (0.28%)                            -9.30 (0.96)

  Manufactures of leather or
    composition leather (0.13%)        -9.40 (2.52)

  Meat, fresh, chilled, or frozen
    (1.40%)                           -67.85 (0.26)

  Medicinal and pharmaceutical
    products (0.75%)                   29.54 (0.16)

  Mineral manufactures, n.e.s.
    (0.28%)                            -4.49 (2.79)    1.07 (7.11)

  Musical instruments, sound
    recorders (0.88%)                  -2.81 (0.92)

  Ores and concentrates of
    nonferrous metals (0.09%)          -1.44 (0.50)

  Organic chemicals (3.96%)             5.06 (1.69)    0.46 (2.19)

  Other electrical machinery and
    apparatus (11.52%)                 -1.06 (0.68)    1.27 (6.10)

  Other inorganic chemicals (0.34%)    -1.63 (1.16)    0.36 (3.03)

  Pearls and precious and
    semiprecious stones (0.17%)        -4.50 (0.56)    2.19 (3.35)

  Perambulators, toys, games,
    sporting goods (0.29%)            -13.99 (2.15)

  Perfumery, cosmetics,
    dentifrices (0.32%)                23.28 (0.66)

  Petroleum products (3.36%)          -75.06 (1.81)

  Pigments, paints, varnishes,
    and related materials (0.59%)     -34.19 (1.36)

  Pottery (0.01%)                      -9.70 (1.65)

  Road motor vehicles (12.58%)          0.21 (0.06)    0.90 (4.33)

  Sanitary, plumbing, heating and
    lighting fixtures (0.16%)          -1.80 (0.15)

  Scientific, medical, optical,
    meas./co (4.15%)                  -63.76 (0.52)

  Soaps, cleansing and polishing
    preparations (0.20%)              -43.54 (0.85)

  Spices (0.01%)                        4.36 (2.43)    0.30 (2.13)

  Stone, sand, and gravel (0.02%)      -7.54 (1.21)

  Sugar confectionary, excluding
    chocolate (0.04%)                   8.61 (0.48)

  Sulfur and unroasted iron
    pyrites (0.00%)                    -2.19 (1.44)    0.88 (7.23)

  Telecommunications apparatus
    (4.62%)                            -3.55 (1.15)    0.75 (1.81)

  Textile and leather machinery
    (1.46%)                             1.26 (0.44)    1.07 (6.76)

  Textile fabrics (0.19%)              -5.48 (1.18)    1.69 (2.43)

  Textile yarn and thread (0.37%)      -7.25 (1.46)    1.49 (3.98)

  Tobacco manufactures (0.01%)         38.66 (1.45)

  Tools for use in the hand or in
    machines (0.32%)                    2.28 (2.04)    0.96 (6.96)

  Travel goods, handbags, and
    similar containers (0.03%)        -29.31 (0.61)

  Universals, plates and sheets
    of iron (0.84%)                     7.77 (1.26)    0.68 (2.02)

  Vegetable fibers, except cotton
    and jute (0.00%)                   -5.76 (0.75)

  Veneers, plywood boards, and
    other wood (0.15%)                 21.98 (0.42)

  Wood manufactures, n.e.s. (0.14%)
                                      -19.52 (1.73)
  Wood, shaped or simply
    worked (0.27%)                      2.53 (0.29)

                                      Long-Run Coefficient Estimates

Industry (Share of Total              ln [Y.sup.Mex]       ln REX
Imports in Parentheses)

Total imports                           1.58 (3.72)      0.31 (0.28)

Positively affected by
    volatility (numbers in
    % are import shares)

  Fuel wood and charcoal (0.00%)        0.82 (3.00)     -3.15 (3.59)

  Lead (0.03%)                          3.02 (5.27)      2.71 (1.69)

  Manufactures of metal,
    n.e.s. (2.88%)                      2.12 (1.01)     -0.09 (0.32)

  Metalworking machinery (0.31%)        0.89 (4.89)      0.20 (0.38)

  Miscellaneous nonferrous base
    metals/ metallurgy (0.05%)          1.17 (3.12)     -3.42 (2.41)

  Nonferrous metal scrap (0.07%)        1.83 (2.86)      0.18 (0.10)

  Oil-seeds, oil nuts, and
    oil kernels (1.17%)                 4.32 (10.56)    -1.91 (1.67)

  Ships and boats (0.13%)               0.28 (0.86)     -4.75 (4.13)

  Tubes, pipes, and fittings of
    iron (0.32%)                        1.56 (7.74)     -3.08 (4.64)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.33%)          2.30 (5.75)     -1.96 (1.63)

  Wool and other animal
    hair (0.01%)                        4.23 (2.81)     -0.42 (0.87)

Negatively affected by volatility

  Articles of paper, pulp,
    paperboard (1.34%)                  3.79 (10.34)     4.02 (2.76)

  Chemical materials and
    products, n.e.s. (1.33%)            1.11 (3.95)     -1.55 (1.74)

  Copper (0.82%)                        4.18 (10.46)     1.91 (1.52)

  Cotton (0.60%)                        7.68 (3.93)     13.09 (1.78)

  Feeding-stuff for animals,
    excluding unmilled cereal
    (0.54%)                             1.95 (8.18)     -0.49 (0.88)

  Fruit, preserved and fruit
    preparations (0.08%)                2.12 (4.00)      0.87 (0.75)

  Furniture (0.95%)                     4.12 (8.24)      5.83 (2.67)

  Glass (0.50%)                         3.22 (3.46)      4.79 (2.11)

  Metal containers for storage
    and transport (0.12%)               2.33 (4.22)      2.27 (1.32)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.51%)       3.15 (4.51)      1.56 (0.87)

  Office machines (9.73%)               2.54 (4.75)      2.03 (1.44)

  Other crude minerals (0.11%)          0.75 (5.44)     -0.14 (0.30)

  Paper and paperboard (1.27%)          1.82 (4.84)      1.04 (0.77)

  Power-generating machinery
    (3.76%)                             1.98 (13.29)     0.43 (0.96)

  Printed matter (0.71%)                1.73 (2.32)      2.87 (1.37)

  Special textile fabrics (1.05%)       2.87 (12.60)     0.75 (1.15)

  Sugar and honey (0.10%)               5.10 (8.80)      3.91 (1.94)

  Vegetables, roots and tubers,
    fresh (0.10%)                       2.23 (8.90)     -0.24 (0.27)

  Vegetables, roots and tubers,
    preserved (0.22%)                   1.74 (3.20)     -0.45 (0.26)

  Wood in the rough or roughly
    square (0.03%)                      0.68 (2.73)      0.77 (1.18)

  Works of art, collectors
    pieces, and antiques(0.11%)         3.61 (10.18)     1.38 (1.89)

  Zinc (0.03%)                          3.94 (8.75)      4.55 (3.10)

Not affected by volatility

  Agricultural machinery and
    implements (0.31%)                  0.36 (1.26)     -3.17 (3.76)

  Alcoholic beverages (0.11%)          -1.46 (1.13)      2.09 (0.74)

  Animal/vegetable oils and fats,
    processed (0.09%)                   1.16 (1.97)     -0.37 (0.23)

  Articles of artificial plastic
    materials (3.86%)                   7.91 (2.91)     -7.89 (0.96)

  Articles of rubber, n.e.s.
    (1.14%)                             3.18 (9.19)      1.84 (1.95)

  Chocolate and other food
    preparations (0.09%)                1.54 (0.91)      9.82 (1.71)

  Clay and refractory
    construction materials (0.04%)      0.99 (7.16)     -0.12 (0.37)

  Clothing except fur clothing
    (1.54%)                             1.10 (2.18)     -1.68 (1.63)

  Cocoa (0.04%)                        -1.35 (0.33)     15.73 (1.07)

  Cotton Fabrics, woven (0.87%)         2.10 (4.20)     -0.04 (0.03)

  Crude animal materials, n.e.s.
    (0.24%)                             0.71 (1.17)      5.48 (1.18)

  Crude rubber, including synthetic
    and reclaimed (0.16%)               1.43 (2.95)     -0.96 (0.57)

  Developed cinematographic film
    (0.00%)                            -1.48 (2.17)     -2.35 (1.11)

  Domestic electrical equipment
    (0.49%)                             3.39 (6.08)      3.16 (1.37)

  Essential oils, perfume, and
    flavor materials (0.15%)            1.93 (1.97)     -6.36 (1.75)

  Fertilizers manufactured (0.37%)
                                        2.36 (5.67)     -1.75 (1.38)
  Fish, fresh and simply preserved
    (0.05%)                             0.07 (0.10)     -3.15 (1.68)

  Fish, in airtight containers,
    n.e.s. (0.04%)                      0.74 (1.01)     -0.85 (0.46)

  Floor coverings, tapestries,
    etc. (0.12%)                       27.51 (0.37)    -60.60 (0.34)

  Food preparations, n.e.s. (0.71%)     6.52 (0.43)    -21.18 (0.35)

  Footwear (0.05%)                      1.53 (1.58)      2.78 (0.81)

  Fruit, fresh, and nuts
    (excluding oil-nuts) (0.30%)        0.74 (1.01)     -0.85 (0.46)

  Glassware (0.06%)                     2.31 (2.85)      1.64 (0.63)

  Hides and skins (excluding fur
    skins), undressed (0.13%)          -1.17 (6.53)     -0.99 (1.59)

  Household equipment of base
    metals (0.04%)                      1.28 (1.34)      0.43 (0.15)

  Inorganic chemical elements,
    oxides, halogen salts (0.22%)       0.48 (3.68)     -0.01 (0.03)

  Iron steel castings, forgings,
    unwork (0.10%)                      0.42 (0.22)     -1.68 (0.29)

  Jewelery and gold/silversmiths'
    wares (0.34%)                       1.01 (0.85)     -2.09 (0.93)

  Leather (0.65%)                       2.48 (3.51)      0.28 (0.15)

  Lime, cement and fabricated
    building material (excluding
    glass) (0.03%)                      1.87 (5.97)     -1.26 (1.35)

  Machinery and appliances-
    nonelectrical (7.45%)               1.25 (4.97)     -0.40 (0.68)

  Machines for special industries
    (0.94%)                             1.49 (7.84)     -0.70 (1.19)

  Made-up articles, wholly or
    chiefly of textile materials
    (0.11%)                             4.06 (3.85)      5.90 (1.49)

  Manufactured articles, n.e.s.
    (0.28%)                             3.45 (4.00)      0.60 (0.22)

  Manufactures of leather or
    composition leather (0.13%)         2.91 (6.92)      1.26 (1.06)

  Meat, fresh, chilled, or frozen
    (1.40%)                             2.70 (0.41)     34.56 (0.24)

  Medicinal and pharmaceutical
    products (0.75%)                    6.64 (0.26)     -14.18 (0.19)

  Mineral manufactures, n.e.s.
    (0.28%)                             1.81 (9.83)      1.13 (2.15)

  Musical instruments, sound
    recorders (0.88%)                   2.33 (6.16)      0.47 (0.54)

  Ores and concentrates of
    nonferrous metals (0.09%)           1.61 (5.28)     -0.02 (0.03)

  Organic chemicals (3.96%)             1.52 (4.96)     -1.09 (1.19)

  Other electrical machinery and
    apparatus (11.52%)                  1.86 (7.66)      1.19 (1.77)

  Other inorganic chemicals (0.34%)     1.84 (9.63)      0.23 (0.55)

  Pearls and precious and
    semiprecious stones (0.17%)         1.38 (1.63)      0.50 (0.21)

  Perambulators, toys, games,
    sporting goods (0.29%)              3.18 (6.10)      2.85 (1.54)

  Perfumery, cosmetics,
    dentifrices (0.32%)                -0.53 (0.13)     -4.48 (0.58)

  Petroleum products (3.36%)            9.12 (2.40)     16.97 (1.73)

  Pigments, paints, varnishes,
    and related materials (0.59%)       6.71 (2.17)      4.92 (0.88)

  Pottery (0.01%)                       1.82 (3.68)      2.34 (1.14)

  Road motor vehicles (12.58%)          1.62 (4.55)      1.15 (1.18)

  Sanitary, plumbing, heating and
    lighting fixtures (0.16%)           1.09 (0.85)      2.02 (0.54)

  Scientific, medical, optical,
    meas./co (4.15%)                    2.60 (0.81)     27.96 (0.51)

  Soaps, cleansing and polishing
    preparations (0.20%)                4.23 (1.45)     13.21 (0.79)

  Spices (0.01%)                        0.81 (4.22)     -1.70 (3.37)

  Stone, sand, and gravel (0.02%)       2.90 (4.26)      0.49 (0.27)

  Sugar confectionary, excluding
    chocolate (0.04%)                   0.69 (0.38)     -2.06 (0.40)

  Sulfur and unroasted iron
    pyrites (0.00%)                     1.21 (7.50)      0.45 (1.03)

  Telecommunications apparatus
    (4.62%)                             1.87 (3.44)      2.03 (1.35)

  Textile and leather machinery
    (1.46%)                             0.49 (1.77)      1.18 (1.51)

  Textile fabrics (0.19%)               2.25 (2.89)      1.51 (0.94)

  Textile yarn and thread (0.37%)       2.24 (4.23)      1.47 (1.02)

  Tobacco manufactures (0.01%)         -3.03 (1.21)     -8.07 (1.19)

  Tools for use in the hand or in
    machines (0.32%)                    0.87 (5.90)      0.20 (0.48)

  Travel goods, handbags, and
    similar containers (0.03%)          1.75 (0.82)     10.15 (0.59)

  Universals, plates and sheets
    of iron (0.84%)                     1.13 (1.52)     -2.01 (1.43)

  Vegetable fibers, except cotton
    and jute (0.00%)                   -1.17 (1.48)      4.80 (1.89)

  Veneers, plywood boards, and
    other wood (0.15%)                 -2.51 (0.33)      0.24 (0.03)

  Wood manufactures, n.e.s. (0.14%)
                                        3.10 (3.65)      5.12 (1.43)
  Wood, shaped or simply
    worked (0.27%)                      0.78 (0.76)      0.72 (0.38)

                                      Long-Run Coefficient
                                          Estimates

Industry (Share of Total                  In VOL
Imports in Parentheses)

Total imports                          -0.14 (0.58)

Positively affected by
    volatility (numbers in
    % are import shares)

  Fuel wood and charcoal (0.00%)        0.41 (1.83)

  Lead (0.03%)                          0.98 (3.34)

  Manufactures of metal,
    n.e.s. (2.88%)                      1.17 (2.10)

  Metalworking machinery (0.31%)        0.14 (1.72)

  Miscellaneous nonferrous base
    metals/ metallurgy (0.05%)          0.76 (1.99)

  Nonferrous metal scrap (0.07%)        0.98 (1.73)

  Oil-seeds, oil nuts, and
    oil kernels (1.17%)                 0.63 (2.45)

  Ships and boats (0.13%)               0.90 (3.12)

  Tubes, pipes, and fittings of
    iron (0.32%)                        0.40 (2.54)

  Tulles, lace, embroidery,
    ribbons, trimmings (0.33%)          0.63 (2.57)

  Wool and other animal
    hair (0.01%)                        2.55 (6.12)

Negatively affected by volatility

  Articles of paper, pulp,
    paperboard (1.34%)                 -0.46 (1.65)

  Chemical materials and
    products, n.e.s. (1.33%)           -0.24 (2.29)

  Copper (0.82%)                       -0.56 (1.70)

  Cotton (0.60%)                       -4.19 (2.65)

  Feeding-stuff for animals,
    excluding unmilled cereal
    (0.54%)                            -0.31 (2.99)

  Fruit, preserved and fruit
    preparations (0.08%)               -1.07 (3.20)

  Furniture (0.95%)                    -0.83 (1.72)

  Glass (0.50%)                        -1.32 (2.84)

  Metal containers for storage
    and transport (0.12%)              -0.94 (2.09)

  Nails, screws, nuts, bolts,
    rivets of iron, steel (0.51%)      -0.90 (2.27)

  Office machines (9.73%)              -0.82 (2.07)

  Other crude minerals (0.11%)         -0.15 (2.38)

  Paper and paperboard (1.27%)         -0.45 (1.74)

  Power-generating machinery
    (3.76%)                            -0.29 (2.62)

  Printed matter (0.71%)               -0.96 (2.01)

  Special textile fabrics (1.05%)      -0.54 (4.03)

  Sugar and honey (0.10%)              -1.83 (3.05)

  Vegetables, roots and tubers,
    fresh (0.10%)                      -0.51 (2.05)

  Vegetables, roots and tubers,
    preserved (0.22%)                  -0.41 (2.20)

  Wood in the rough or roughly
    square (0.03%)                     -0.75 (4.26)

  Works of art, collectors
    pieces, and antiques(0.11%)        -0.42 (2.04)

  Zinc (0.03%)                         -1.25 (3.20)

Not affected by volatility

  Agricultural machinery and
    implements (0.31%)                 -0.03 (0.06)

  Alcoholic beverages (0.11%)          -0.30 (0.80)

  Animal/vegetable oils and fats,
    processed (0.09%)                  -1.93 (1.17)

  Articles of artificial plastic
    materials (3.86%)                  -0.17 (1.17)

  Articles of rubber, n.e.s.
    (1.14%)                             1.10 (0.64)

  Chocolate and other food
    preparations (0.09%)                0.01 (0.20)

  Clay and refractory
    construction materials (0.04%)      0.06 (0.45)

  Clothing except fur clothing
    (1.54%)                            -1.86 (0.69)

  Cocoa (0.04%)                         0.01 (0.02)

  Cotton Fabrics, woven (0.87%)        -0.91 (1.27)

  Crude animal materials, n.e.s.
    (0.24%)                            -0.38 (1.04)

  Crude rubber, including synthetic
    and reclaimed (0.16%)               0.47 (0.70)

  Developed cinematographic film
    (0.00%)                            -0.64 (1.12)

  Domestic electrical equipment
    (0.49%)                             0.09 (0.25)

  Essential oils, perfume, and
    flavor materials (0.15%)           -0.35 (1.08)

  Fertilizers manufactured (0.37%)
                                        0.31 (0.50)
  Fish, fresh and simply preserved
    (0.05%)                            -0.11 (0.37)

  Fish, in airtight containers,
    n.e.s. (0.04%)                     -4.56 (0.40)

  Floor coverings, tapestries,
    etc. (0.12%)                      -10.49 (0.34)

  Food preparations, n.e.s. (0.71%)     1.25 (1.16)

  Footwear (0.05%)                     -0.11 (0.37)

  Fruit, fresh, and nuts
    (excluding oil-nuts) (0.30%)       -0.24 (0.66)

  Glassware (0.06%)                     0.15 (0.88)

  Hides and skins (excluding fur
    skins), undressed (0.13%)           0.42 (0.65)

  Household equipment of base
    metals (0.04%)                     -0.11 (1.60)

  Inorganic chemical elements,
    oxides, halogen salts (0.22%)       0.55 (0.75)

  Iron steel castings, forgings,
    unwork (0.10%)                      0.65 (0.75)

  Jewelery and gold/silversmiths'
    wares (0.34%)                      -0.56 (1.18)

  Leather (0.65%)                       0.02 (0.10)

  Lime, cement and fabricated
    building material (excluding
    glass) (0.03%)                     -0.07 (0.44)

  Machinery and appliances-
    nonelectrical (7.45%)              -0.10 (0.57)

  Machines for special industries
    (0.94%)                            -0.18 (0.54)

  Made-up articles, wholly or
    chiefly of textile materials
    (0.11%)                            -0.34 (0.39)

  Manufactured articles, n.e.s.
    (0.28%)                            -0.12 (0.51)

  Manufactures of leather or
    composition leather (0.13%)         8.98 (0.24)

  Meat, fresh, chilled, or frozen
    (1.40%)                             6.94 (0.18)

  Medicinal and pharmaceutical
    products (0.75%)                   -0.02 (0.30)

  Mineral manufactures, n.e.s.
    (0.28%)                             0.13 (0.79)

  Musical instruments, sound
    recorders (0.88%)                  -0.13 (0.81)

  Ores and concentrates of
    nonferrous metals (0.09%)          -0.13 (0.49)

  Organic chemicals (3.96%)            -0.01 (0.10)

  Other electrical machinery and
    apparatus (11.52%)                 -0.07 (1.18)

  Other inorganic chemicals (0.34%)    -0.71 (1.28)

  Pearls and precious and
    semiprecious stones (0.17%)        -0.61 (1.34)

  Perambulators, toys, games,
    sporting goods (0.29%)              0.25 (0.13)

  Perfumery, cosmetics,
    dentifrices (0.32%)                -1.78 (1.61)

  Petroleum products (3.36%)           -0.42 (0.57)

  Pigments, paints, varnishes,
    and related materials (0.59%)       0.22 (0.73)

  Pottery (0.01%)                      -0.38 (1.56)

  Road motor vehicles (12.58%)          0.38 (0.65)

  Sanitary, plumbing, heating and
    lighting fixtures (0.16%)          -0.34 (0.23)

  Scientific, medical, optical,
    meas./co (4.15%)                   -1.52 (0.97)

  Soaps, cleansing and polishing
    preparations (0.20%)               -0.02 (0.22)

  Spices (0.01%)                        0.40 (0.92)

  Stone, sand, and gravel (0.02%)       0.34 (0.36)

  Sugar confectionary, excluding
    chocolate (0.04%)                   0.00 (0.01)

  Sulfur and unroasted iron
    pyrites (0.00%)                    -0.14 (0.73)

  Telecommunications apparatus
    (4.62%)                            -0.21 (1.11)

  Textile and leather machinery
    (1.46%)                             0.42 (0.99)

  Textile fabrics (0.19%)               0.06 (0.31)

  Textile yarn and thread (0.37%)      -1.67 (1.01)

  Tobacco manufactures (0.01%)         -0.11 (1.56)

  Tools for use in the hand or in
    machines (0.32%)                   -3.06 (0.65)

  Travel goods, handbags, and
    similar containers (0.03%)          0.11 (0.30)

  Universals, plates and sheets
    of iron (0.84%)                     0.06 (0.14)

  Vegetable fibers, except cotton
    and jute (0.00%)                    2.55 (0.56)

  Veneers, plywood boards, and
    other wood (0.15%)                  0.16 (0.40)

  Wood manufactures, n.e.s. (0.14%)
                                       -0.01 (0.02)
  Wood, shaped or simply
    worked (0.27%)                     -0.01 (0.02)