Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-09

Matthieu Bussière, Giovanni Callegari, Fabio Ghironi, Giulia Sestieri, Norihiko Yamano

NBER Working Paper No. 17712
Issued in December 2011
NBER Program(s):International Finance and Macroeconomics, International Trade and Investment

This paper introduces a new methodology for the estimation of demand trade elasticities based on an import intensity-adjusted measure of aggregate demand, with the foundation of a stylized theoretical model. We compute the import intensity of demand components by using the OECD Input-Output tables. We argue that the composition of demand plays a key role in trade dynamics because of the large movements in the most import-intensive categories of expenditure (especially investment, but also exports). We provide evidence in favor of these mechanisms for a panel of 18 OECD countries, paying particular attention to the 2008-09 Great Trade Collapse.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w17712

Published: Matthieu Bussière & Giovanni Callegari & Fabio Ghironi & Giulia Sestieri & Norihiko Yamano, 2013. "Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-2009," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 118-51, July. citation courtesy of

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