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Review of export elasticities

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Author Info

  • Ballingall, John

    (New Zealand Institute of Economic Research)

  • Allen, James

    (New Zealand Institute of Economic Research)

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    Abstract

    Assumptions on export elasticities can have a big impact on CGE model results, especially at the industry level. Export elasticities measure the responsiveness of demand for a country’s exports to a change in the world price. The greater the elasticity, the greater the change in export demand following a price shift. We find that the size of the export elasticities has an important impact on the magnitude of Computable General Equilibrium (CGE) modelling results. We use CGE models to assess the impacts of shocks, such as a major policy change, on measures of welfare like real consumption or GDP. The export elasticity determines the amount of export revenue for a given change in export volumes. The change in revenue flows through the economy and influences measures of welfare like real consumption or GDP. The scale of the elasticities can have a material impact on these results. The results, in turn, influence whether a policy or event is thought to be ‘good’ or ‘bad’ for an economy. Understanding where these elasticities came from, how robust they are, and how they might be re-estimated is therefore important.

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    File URL: http://nzier.org.nz/publication/review-of-export-elasticities-nzier-working-paper-20114
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    Bibliographic Info

    Paper provided by New Zealand Institute of Economic Research in its series NZIER Working Paper with number 2011/4.

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    Length: 31 pages
    Date of creation: 13 Oct 2011
    Date of revision:
    Handle: RePEc:ris:nzierw:2011_004

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    Web page: http://www.nzier.org.nz/
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    Related research

    Keywords: CGE modelling and analysis; export elasticities; New Zealand;

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    Cited by:
    1. Anita King, 2012. "Economy-Wide Impacts of Industry Policy," Treasury Working Paper Series 12/05, New Zealand Treasury.

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