Working Paper: CEPR ID: DP426
Authors: Anton Muscatelli; T. G. Srinivasan; David Vines
Abstract: This paper investigates the current debate regarding the robustness of estimates of export demand and supply elasticities for LDCs and NIEs obtained by recent empirical studies. The empirical findings reported in the paper suggest that price elasticities of demand are indeed low, and that there are strong and significant income effects on export demand. Furthermore, using a variety of modelling approaches, we demonstrate that the choice of estimation method and normalization need not lead to drastically different conclusions regarding the size of the price elasticity of demand for NIE exports. While this points against the "small-country assumption" usually made regarding LDC/NIE exports, we argue that the preferred development strategy for LDCs need not necessarily be an inward-oriented o.
Keywords: export demand; supply; NIE exports; price elasticities; income elasticity; terms of trade; trade policy
JEL Codes: 410; 130210
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| world income (F40) | export demand (F10) |
| normalization and dynamic specification (C69) | price elasticity of demand for NIE exports (F14) |
| supply-side influences (E65) | income effects on export demand (F14) |
| supply-side influences on demand (J23) | cautious interpretation of income-market growth elasticities (F40) |
| low price elasticities of demand (D12) | terms of trade not deteriorating (F14) |