Elasticity Optimism

WPIEA2009279 Image
Price:  $18.00

Author/Editor: Jean Imbs, Isabelle Mejean
Release Date: © December, 2009
ISBN : 978-1-45187-424-2
Stock #: WPIEA2009279
English
Stock Status: Available

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Description

In most macroeconomic models, the substitutability between domestic and foreign goods is calibrated using aggregated data. This imposes homogeneous elasticities across goods, and the calibration is only valid under this assumption. If elasticities are heterogeneous, the aggregate substitutability is a weighted average of good-specific elasticities, which in general cannot be inferred from aggregated data. We identify structurally the substitutability in US goods using multilateral trade data. We impose homogeneity, and find an aggregate elasticity similar in value to conventional macroeconomic estimates. It is more than twice larger with sectoral heterogeneity. We discuss the implications in various areas of international economics.

Taxonomy

Balance of trade , Economic policy , Exports , Imports , International trade , Monetary policy




More publications in this series: Working Papers


More publications by: Jean Imbs ; Isabelle Mejean