Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-2009

This paper introduces a new empirical model of international trade flows based on an import intensity-adjusted measure of aggregate demand. 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 dy...

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Bibliographic Details
Published inAmerican economic journal. Macroeconomics Vol. 5; no. 3; pp. 118 - 151
Main Authors Bussière, Matthieu, Callegari, Giovanni, Ghironi, Fabio, Sestieri, Giulia, Yamano, Norihiko
Format Journal Article
LanguageEnglish
Published Pittsburgh American Economic Association 01.07.2013
Subjects
Aggregate demand
Central banks
Consumption
Demand
Economic crisis
Economic fluctuations
Economic models
Economic recessions
Elasticity of demand
Expenditures
Exports
GDP
Government spending
Gross Domestic Product
Imports
International trade
Macroeconomics
Recessions
Studies
The Financial Crisis: Lessons for International Macroeconomics Conference Paris, France, October 28-29, 2011
Trade
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Summary:This paper introduces a new empirical model of international trade flows based on an import intensity-adjusted measure of aggregate demand. 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 relatively larger 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 2008-2009 Great Trade Collapse.
ISSN:1945-7707
1945-7715
DOI:10.1257/mac.5.3.118