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Aggregation Bias in Trade Elasticities: The Case of Macedonia

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  • Branimir Jovanovic

Abstract

This paper evaluates the bias which may occur when trade elasticities are estimated using data on aggregate trade, instead of using data on bilateral trade. The exercise is done on the case of Macedonia. Elasticities obtained from aggregate-trade data, using the Autoregressive Distributed Lag approach, are compared with the elasticities obtained from bilateral-trade data, using dynamic heterogenous panels techniques. Results point out that the aggregation bias is sizeable and that relying on aggregate data can lead to wrong conclusions about the trade elasticities.

Suggested Citation

  • Branimir Jovanovic, 2013. "Aggregation Bias in Trade Elasticities: The Case of Macedonia," FIW Working Paper series 106, FIW.
    • Handle: RePEc:wsr:wpaper:y:2013:i:106
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    2. Jose L. Zofio & Jorge Diaz-Lanchas & Damiaan Persyn & Javier Barbero, 2020. "Estimating foreign and national trade elasticities in the EU internal market using Generalised Transport Costs," JRC Working Papers on Territorial Modelling and Analysis 2020-05, Joint Research Centre.

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    More about this item

    Keywords

    trade elasticities; aggregation bias; dynamic panel; heterogenous panel; ARDL; Macedonia;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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