Working Paper: CEPR ID: DP1970
Authors: Tamim Bayoumi
Abstract: 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 behaviour across these countries in spite of the large number of individual flows analysed. The results indicate a powerful long-run effect from supply on exports. Also, the real exchange rate elasticity depends upon the behaviour of third country exchange rates, there is evidence of pricing to market and of a J-curve.
Keywords: trade elasticities; panel data
JEL Codes: F11; F12; F17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Domestic Output (E23) | Exports (F10) |
| Real Exchange Rate (F31) | Exports (F10) |
| Prices in Other Export Markets (F19) | Imports (F14) |