El Paso Customs District Cross-Border Trade Flows

An important issue in applied international economics is the extent to which trade flows adjust to changes in economic activity, relative prices, and exchange rates. While there have been numerous studies regarding aggregate trade flows, relatively little empirical work has been completed with respect to analyzing international merchandise trade growth throught the United States - Mexico border region. To examine whether border trade flows can be successfully modeled, short-term time series characteristics of cross-border trade flows through El Paso, Texas are analyzed. A transfer function ARIMA econometric methodology is employed using data from January 1995 to December 2002. Results indicate that economic activity in the United States and Mexico, along with relative prices adjusted for exchange rates play important roles in determining monthly fluctuations in border area trade flows.