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Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-2009

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  • Matthieu Bussière
  • Giovanni Callegari
  • Fabio Ghironi
  • Giulia Sestieri
  • Norihiko Yamano

Abstract

This paper introduces a new empirical model of international trade flows based on an import intensity-adjusted measure of aggregate demand. 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 relatively larger 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 2008–2009 Great Trade Collapse.

Suggested Citation

  • Matthieu Bussière & Giovanni Callegari & Fabio Ghironi & Giulia Sestieri & Norihiko Yamano, 2013. "Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-2009," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 118-151, July.
  • Handle: RePEc:aea:aejmac:v:5:y:2013:i:3:p:118-51
    Note: DOI: 10.1257/mac.5.3.118
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • G01 - Financial Economics - - General - - - Financial Crises

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