Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-09

43 Pages Posted: 11 Jan 2012 Last revised: 26 May 2021

See all articles by Matthieu Bussière

Matthieu Bussière

Banque de France

Giovanni Callegari

International Monetary Fund

Fabio Pietro Ghironi

University of Washington

Giulia Sestieri

Banque de France

Norihiko Yamano

Organization for Economic Co-Operation and Development (OECD)

Date Written: December 2011

Abstract

This paper introduces a new methodology for the estimation of demand trade elasticities based on an import intensity-adjusted measure of aggregate demand, with the foundation of a stylized theoretical model. 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 large 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 2008-09 Great Trade Collapse.

Suggested Citation

Bussiere, Matthieu and Callegari, Giovanni and Ghironi, Fabio Pietro and Sestieri, Giulia and Yamano, Norihiko, Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-09 (December 2011). NBER Working Paper No. w17712, Available at SSRN: https://ssrn.com/abstract=1983030

Matthieu Bussiere (Contact Author)

Banque de France ( email )

Paris
France

Giovanni Callegari

International Monetary Fund ( email )

700 19th Street, NW
Washington, DC 20431
United States

Fabio Pietro Ghironi

University of Washington ( email )

Department of Economics
Box 353330
Seattle, WA 98195-3330
United States
206-543-5795 (Phone)

HOME PAGE: http://faculty.washington.edu/ghiro

Norihiko Yamano

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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