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The trade effect of price risk: a system-wide approach

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  • Dengjun Zhang

Abstract

In this study, we are concern with incorporating risk factors into the Almost Ideal Demand System model. In the modified model, the risk factors affect trade response to price changes (the indirect effect) and the reallocation of the import expenditure (the direct effect). This specification can be used to explain why the trade effect of risk factors is ambiguous regarding the magnitude and sign. The empirical application to the US whitefish import market reveals the proportionality between the risk and the price effects and further implies a general positive direct effect. Copyright Springer-Verlag Berlin Heidelberg 2015

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  • Dengjun Zhang, 2015. "The trade effect of price risk: a system-wide approach," Empirical Economics, Springer, vol. 48(3), pages 1149-1167, May.
    • Handle: RePEc:spr:empeco:v:48:y:2015:i:3:p:1149-1167
    DOI: 10.1007/s00181-014-0818-6
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    More about this item

    Keywords

    Import demand; Price risk; Cointegration; Whitefish; D81; F14; F31;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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