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Estimation of Elasticities and Interpretation of Results

  • Robert M. Stern
  • Jonathan Francis
  • Bruce Schumacher

Abstract

Estimates of the response of imports and exports to price changes are interesting and important for a variety of purposes. On an aggregate level, the investigator or policy maker may wish to know what effects exchange-rate realignments may have on the trade balances of different countries. Or, put differently, the problem may be to determine the exchange-rate change required to eliminate a trade imbalance of a given size. Exchange-rate changes will also affect aggregate income and employment as a consequence of the expenditure shifts that occur and that result in the expansion or contraction of a country’s export and import-competing industries. To cope with issues like these, information on the relevant elasticities of demand and supply is necessary.

Keywords

Price Change Demand Function Price Elasticity Trade Balance Income Elasticity 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes and References

  1. 1.
    For a derivation and illustration of the relationship between the domestic and foreign trade elasticities, see Robert M. Stern, The Balance of Payments ( Chicago: Aldine, 1973 ), pp. 62–4.Google Scholar
  2. For studies in which the relationship has been used, see B. Balassa and M. E. Kreinin, ‘Trade Liberalisation under the ‘Kennedy Round’: The Static Effects’, Review of Economics and Statistics, Vol. XLIX (May 1967).Google Scholar
  3. A. G. Blomqvist and Walter Haessel, ‘The Price Elasticity of Demand for Ghana’s Cocoa: Some Estimates and Policy Implications’, Economic Bulletin of Ghana, Vol. 2 (No. 3, 1972 ).Google Scholar
  4. J. Neill Fortune, ‘Measures of Tariff Elasticities’, Applied Economics, Vol. 3 (March 1971), and Mordechai Kreinin, ‘Price Elasticities in International Trade’, Review of Economics and Statistics, Vol. XLIX (November 1967). Google Scholar

Copyright information

© Trade Policy Research Centre 1976

Authors and Affiliations

  • Robert M. Stern
  • Jonathan Francis
  • Bruce Schumacher

There are no affiliations available

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