Trade Elasticities and Market Expectations in Brazil

This paper provides econometric estimates of trade elasticities for Brazil obtained through cointegration and vector auto regression models and controlling for the effects of exchange rate volatility, capacity utilization, and changes in import tariffs. The results suggest that (i) recent market expectations may have been unduly pessimistic regarding the responsiveness of Brazil's trade flows to the real exchange rate, but (ii) the GDP growth rates targeted by the new government may put downward pressure on the exchange rate and thus render the achievement of official inflation targets considerably more difficult if structural reforms are not implemented.
Publication date: July 2003
ISBN: 9781451856149
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Exports and Imports , Exports and Imports , Money and Monetary Policy , Money and Monetary Policy , elasticities , exchange rate , cointegration models , reer , export volumes , exchange rate volatility , real effective exchange rate , Country and Industry Studies of Trade , Open Economy Macroeconomics

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