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The Elasticity of Substitution in Demand for Non-Tradable Goods in Latin America: The Case of Argentina

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  • Martín González Rozada
  • Pablo Andrés Neumeyer
  • Alejandra Clemente
  • Diego Luciano Sasson
  • Nicholas Trachter

Abstract

The objective of this paper is to estimate the elasticity of substitution in the demand for non-tradable goods relative to tradable goods in Argentina. This parameter plays a crucial role in the analysis of the macroeconomic equilibrium of a small open economy (Mendoza, Galindo and Izquierdo, 2003). Using two data sets, estimates of approximately 0. 40 and 0. 48, respectively, are found for this elasticity.

Suggested Citation

  • Martín González Rozada & Pablo Andrés Neumeyer & Alejandra Clemente & Diego Luciano Sasson & Nicholas Trachter, 2004. "The Elasticity of Substitution in Demand for Non-Tradable Goods in Latin America: The Case of Argentina," Research Department Publications 3179, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:3179
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    References listed on IDEAS

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    1. Mendoza, Enrique G, 1995. "The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 101-137, February.
    2. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    3. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-618, Nov.-Dec..
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    Cited by:

    1. Stephanie Schmitt-Grohé & Martin Uríbe, 2011. "Pegs and Pain," NBER Working Papers 16847, National Bureau of Economic Research, Inc.
    2. Paul Segal, 2012. "Natural Resource Wealth and Directed Technical Change," OxCarre Working Papers 088, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    3. Gabriela Cugat, 2019. "Emerging markets, household heterogeneity, and exchange rate policy," 2019 Meeting Papers 526, Society for Economic Dynamics.
    4. Ottonello, Pablo, 2021. "Optimal exchange-rate policy under collateral constraints and wage rigidity," Journal of International Economics, Elsevier, vol. 131(C).

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