A Method for Calculating Export Supply and Import Demand Elasticities

ABSTRACTI apply limited-information maximum likelihood (LIML) to estimate import demand and export supply elasticities for a range of eurozone countries. The results highlight inconsistencies in the parameters estimated by LIML relative to an estimator that is robust to heteroskedasticity. The nature of the structural equations reveals complications generated by the limiting behavior of the parameters that can be replicated in finite samples. The results of simulations underscore improvements in parameter estimates in a three-dimensional panel, suggesting that the problem of limiting behaviour can be overcome in larger dataset/panels.

The aim of this thesis is to extend the empirical research which has been undertaken using the GNP function approach to measuring export supply and import demand responsiveness. Exports and imports are divided into several components and detailed sets of elasticities produced. In the second part o£ the thesis imperfect adjustment is allowed for in the GNP function model. The GNP function framework treats imports as an input to the domestic technology while exports are an output. The aggregate technology can then be represented by a restricted profit function facilitating the derivation of net output supply elasticities. In this study the aggregate net outputs are exports, imports, labour and domestic sales supply. Capital is treated as a fixed input. Time-series of input-output data for Canada are used covering the period 1961 to 1980. In the first model estimated, four export and four import components are included by the use of aggregator functions and a two-stage estimation process. The recently developed Symmetric Generalised McFadden functional form which permits imposition of the correct curvature conditions while retaining flexibility is used at both the aggregator and GNP function levels. The aggregate export own-price supply elasticity was found to be 1.67 in 1970 while the aggregate import own-price demand elasticity was -1.62. Increases in the prices of both imports and labour were found to decrease the supply of exports while exports were found to be complementary to the output of domestic sales supply. The demand for labour was found to be more elastic than in earlier studies and a general trend towards increasing price responsiveness in the Canadian economy was observed. The own-price elasticities for the four export and four import components were stable and of reasonable magnitude. All the export and import components were found to be complementary. To remove the assumption of separability, modelling was extended to two larger disaggregated Generalised McFadden GNP function models containing four export (import) components, aggregate imports (exports), labour and domestic sales as net outputs. Using this procedure more substitution between the export and import components was found. A planning price model whereby the producers' notional price adjusts gradually to actual price changes indicated that imperfect adjustment is particularly important in the traded goods sector. Exports fully adjusted to price changes only over an extended period. Finally, an adjustment costs model was estimated which indicated that the main effect of allowing for imperfect adjustment was on input use. Differences between long-run and short-run export supply and import demand responsiveness were relatively small. Considerable substitutability between labour and capital in the long-run was observed and since labour was also variable in the short-run this produced overshooting of labour demand. An increase in export prices thus caused a large short-run increase in labour demand but in the long-run the capital stock was increased and substituted for much of the short-run labour increase.

The violence of exchange-rate fluctuations in countries which in the past, have had unregulated markets for foreign exchange has frequently led to the conjecture that a system of market exchange rates may be inherently unstable. The condition of stability, of course, is that: a rise in the price of foreign currency shall reduce the excess demand for such foreign exchange. The relation of this condition to elasticities of demand for imports and elasticities of supply of exports has been investigated in considerable detail by Alfred M a r s h a 1, Mrs. Joan R o b i n s o n, C. W. B i c k e r d i k e, A. J. B r o w n, and others. All of the investigators have considered a world economy consisting of only two countries, and the conclusions they reached are as follows: (1) If exports are produced under constant price both at home and abroad, stability requires that the sum of the important demand elasticities at home and abroad must exceed unity. (2) If the elasticity of supply of exports is zero at home and abroad, the exchange market is always stable regardless of the demand elasticities. (3) In the intermediate case, stability requires that y1y2(e1-fe2+1) + e,e2(ql +2-1) shall be positive, where Yl and Yq2 are import demand elasticities at home and abroad and where e1 and e2 are export supply elasticities. Brown considers an additional complication in which each country's exports consist partly of imported materials, and concludes that the presence of such imported materials increases the stability of the market. It is easily shown, however, that this conclusion is incorrect. If exports are produced at constant supply price, the condition of stability, after allowing for imported raw materials, is: r +'r2y2 > 1 where Yi and y2 are elasticities of demand for imports of finished goods, and where r1 andr2 are the' ratios of the value of exports retained by domestic producers to the total value of exports. Since these ratios are less than unity, and will be considerably less than unity if imported materials comprise a large part of the cost of exports, it follows. that the exchange market may be unstable even when q1 + 112 exceeds unity. If exchange markets are 'stable as of given supply and demand schedules, the possibility still remains that they may be made unstable

The Bagwell and Staiger (1990) theory of cooperative trade agreements predicts new tariffs (i) increase with imports, (ii) increase with the inverse of the sum of the import demand and export supply elasticities, and (iii) decrease with the variance of imports. We find US import policy during 1997–2006 to be consistent with this theory. A one standard deviation increase in import growth, the inverse of the sum of the import demand and export supply elasticity, and the standard deviation of import growth changes the probability that the US imposes an antidumping tariff by 35 percent, by 88 percent, and by –76 percent, respectively.

Most studies of the link between dyadic trade and militarized conflict examine the extent of trade interaction. However, interaction measures do not account for the impact of cutting off trade (i.e., exit costs). In this article, I highlight the link between exit costs, the cost of conflict, and “the spoils of conquest,” arguing that one state’s exit costs are associated with higher incidence of dyadic conflict when its trade partner’s exit costs are low. However, its exit costs become less aggravating—and eventually pacifying—as its trade partner’s exit costs increase. I test this argument by estimating import demand and export supply elasticities, developing yearly exit cost measures for directed dyads, 1984–2000. Statistical tests confirm that unilaterally high exit costs are aggravating, but that jointly high exit costs are pacifying, a pattern most prominent for trade in strategic commodities.

International trade is the purchase and sale of goods by companies in different countries. Consumer goods, raw materials, food, agricultural products, pharmaceutical products, medical equipment, iron and steel, plastics, chemicals, clothes, energy, vehicles, electrical and electronic equipment, nuclear reactors, aircrafts, machinery, wind turbines, rare earth minerals, weapons, military materials, all are bought and sold in the international marketplace. Ethics has become a big issue in the last decades, due to globalization, where they try to harmonize hundreds of different cultures, customs, traditions, and values to a uniform one, but it is impossible and unachievable. International trade allows countries to expand their markets and access goods and services by importing them, otherwise it may not be available domestically; but there are many cases which cause serious problems with domestic production. As a result of international trade (exports and imports), the markets become more competitive, however ethical and fair trade is necessary for countries to maximize the wellbeing of their citizens, given their income constraints. International fair-trade policies and trade restrictions are the set of agreements, regulations, and practices by a government that affect trade with foreign countries, which is a combination of standards, laws, and practices that influence imports and exports. Trade policies can include regulations, devaluation of currencies, dumping, tariffs, and quotas, subsidies, with which they want to restrict trade and set policies that protect local industries from foreign competition. Fair and ethical trade policies must have a number of benefits, including economic growth, employment, attracting domestic firms that operate abroad to produce locally more efficiently at lower costs of production, and to lead countries to autarky, prosperity, and to maximize their social welfare. These ethical and fair-trade policies are effective if the price elasticities of demand for imports and supply of exports are high (elastic). The empirical results show that most of these elasticities are small (inelastic). JEL classification numbers: D6, F10, F13, F42, I38, J38, L40, C52. Keywords: Ethics and Economic Welfare, International Trade, Commercial policy: Protection, Promotion, Trade Negotiations, International Policy Coordination, Provision and Effects of Welfare Program, Labor: Public Policy, Antitrust Policy, Model Evaluation and Testing.

Elasticities of import demand and supply often drive economic models, but few empirical estimates of these elasticities exist for vegetables and fruits. For those that do exist, most are outdated. Because elasticities change over time as income, prices, and market conditions change, outdated elasticity estimates may not be representative of changes in import quantities demanded or in acreages, yield, and quantities supplied. Moreover, import demand elasticities by country of origin for most vegetables and fruits are nonexistent. This article presents research that updates elasticity estimates for each of the selected product categories and includes production and trade implications.

Import Demand Elasticity and Exporter Responses to Anti-Dumping Duties

Static and dynamic models of the derived demand for forest product imports were estimated for each of 10 major forest products covering industrial roundwood, wood-based panels, pulp, and paper and paperboard. The models were estimated with panel data from 64 countries for 1970–1987, by pooled ordinary least squares, first differencing, fixed effects, random effects and the Arellano–Bond approach. The predictive accuracy of the demand equations was tested with postsample data from 1988–1997. Based on multiple criteria, the best results were obtained with the dynamic model estimated by the Arellano–Bond method. For most products the demand for imports was found to be inelastic with respect to price. For all products the demand for imports was elastic with respect to income.

This paper applies the balance-of-payments-constrained growth model to 17 countries of Latin America over the period 1977-2002. The crucial parameter to estimate is the income elasticity of demand for imports, which is done for Latin America as a whole and for individual countries. As well as estimating over the whole period, the technique of rolling regressions is also used to test whether a trend increase can be discerned as a result of trade liberalization. A trend increase is found for Latin America as a whole and for some individual countries, and the balance-of-payments equilibrium growth rate is a good predictor of growth performance in nine of the 17 countries. There is no evidence that the balance-of-payments equilibrium growth rate has increased in Latin America as a result of trade liberalization.

The link between economic development and the income elasticity of import demand

En esta investigación se analiza el papel de las exportaciones e importaciones industriales en el crecimiento del sector, bajo un enfoque de crecimiento restringido por balanza de pagos, en el periodo 1975-2015. Los resultados empíricos, obtenidos a través de la técnica de corrección de errores, muestran que mientras las elasticidades ingreso de la demanda de exportaciones e importaciones industriales generan un déficit comercial, los precios tienden a contrarrestarlo; sin embargo, la balanza comercial industrial es deficitaria durante todo el periodo de análisis. Los resultados también evidencian que el sector externo industrial explica un porcentaje alto del total de las exportaciones e importaciones nacionales, aspecto paradójico y preocupante para el crecimiento agregado del país, si se considera que la participación del sector industrial en el desarrollo de la economía colombiana es cada vez menor. Se concluye que el crecimiento industrial colombiano es explicado por las elasticidades ingreso de la demanda de las exportaciones e importaciones y por los precios (tipo de cambio real), que el crecimiento potencial del sector es mayor al observado y que el efecto del sector industrial sobre el crecimiento del país es muy bajo.

PurposeThe purpose of this paper is to present an empirical analysis of the aggregated import demand behavior for Nigeria using annual data between 1980 and 2006.Design/methodology/approachThe bounds test analysis was used to estimate the long‐run relationship between imports and its determinants.FindingsTest results show that imports, income and relative prices are cointegrated. The estimated long‐run elasticities of import demand with respect to income and relative prices are 2.48 and −0.133, respectively.Originality/valueThese results suggest that the Marshall‐Lerner condition are not satisfied for Nigeria.

This paper provides fresh estimates of income and price elasticities of import demand in Guyana, Jamaica, and Trinidad and Tobago using a bounds test for cointegration. In addition, the paper also provides estimates of the consumption, investment, and exports elasticities of import demand. These latter elasticities were all found to be positive and statistically significant with values ranging from 0.16 to 0.55 in the long-run.

The Marshall-Lerner condition is a condition that is judged to assess the long-run effects of currency depreciation on the trade balance. It is obtained by estimating price elasticities of a country's demand for imports and rest of the world demand for its exports. When the analysis is extended to bilateral level between two countries using aggregate bilateral trade data or bilateral commodity data, due to lack of prices researchers directly relate inpayments and outpayments to the exchange rate in addition to scale variables. In this paper we try to determine the short-run and long-run effects of real depreciation of the dollar on inpayments of 141 US industries that export to Singapore and 59 US industries that import from Singapore. While we find that most industries are affected in the short-run. However, the short-run effects last into the long-run only in 45 exporting industries and 15 importing industries. Most of the affected industries are small.