THE CYCLICAL RELATIONSHIP BETWEEN EXPORTS AND OUTPUT IN THE UK - 1885-1993

This paper examines the cyclical relationship between exports and outp ut in the U.K. using structural time-series modelling. The time series on exports and output over the period 1885-1993 are decomposed, and t he cyclical components are extracted. Causality testing as applied to the cyclical components reveals the absence of causality from exports to output except in the post-1945 period. The results of causality tes ting are confirmed by the results of estimating a structural time-seri es model in which exports appear as an explanatory state variable. Thr ee different explanations are suggested for the change in this relatio nship during the most recent period.