Estimating Trade Equations from Aggregate Bilateral Data
May 1, 1999
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Summary
This paper uses bilateral data on 420 merchandise trade flows between 21 industrial countries are used to estimate standard trade equations. The data set of over 11,000 observations allows the underlying elasticities to be estimated with considerable precision. Remarkably, a single specification appears to explain behavior across these countries in spite of the large number of individual flows analyzed. The results indicate a powerful long-run effect from supply on exports. Also, the real exchange rate elasticity depends upon the behavior of third country exchange rates. There is evidence of pricing to market and of a J-curve.
Subject: Exchange rates, Export prices, Exports, Real exchange rates, Trade balance
Keywords: WP
Pages:
27
Volume:
1999
DOI:
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Issue:
074
Series:
Working Paper No. 1999/074
Stock No:
WPIEA0741999
ISBN:
9781451849578
ISSN:
1018-5941
