Abstract

This paper analyses the trends and directions of exports and imports of Canada using the time series data for the period 1981 to 2014. Instantaneous and compound growth rates are calculated by using the log-linear regression model in conjunction with an autoregressive integrated moving average (ARIMA) model for forecasting future exports and imports. The results of this study show that there is an increasing trend for both exports and imports. As far as the growth rates are concerned, the two estimated log-linear models depict a comprehensive annual picture of Canadian merchandise trade. The exports grow at an instantaneous rate of 4.46% and at a slightly higher than compound annual growth rate of 4.6%. The overall growth rate of imports is 5.41% and compound annual growth rate is 5.27%. The compound growth rate is marginally higher than the instantaneous growth rate.

The results of the Johansen test for analyzing the long-run relationship between export, import and GDP have further demonstrated that the variables are co-integrated, and have established a long-run association among them.

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