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Understanding the evolution of trade deficits: trade elasticities of industrialized countries

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  • Leland Crane
  • Meredith A. Crowley
  • Saad Quayyum

Abstract

In this article, the authors present updated trade elasticities—measures of how much imports and exports change in response to income and price changes—for the U.S. and six other industrialized countries, collectively known as the Group of Seven. They find that the imports and exports of these countries are slightly more responsive to changes in a country’s total income over a period that ends in 2006, compared with a period that ends in 1994.

Suggested Citation

  • Leland Crane & Meredith A. Crowley & Saad Quayyum, 2007. "Understanding the evolution of trade deficits: trade elasticities of industrialized countries," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 2-17.
  • Handle: RePEc:fip:fedhep:y:2007:i:qiv:p:2-17:n:v.31no.4
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    References listed on IDEAS

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    1. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-125, May.
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    Cited by:

    1. Alberto Bagnai & Christian Alexander Mongeau Ospina, 2014. "The a/simmetrie annual macroeconometric model of the Italian economy: structure and properties," a/ Working Papers Series 1405, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    2. Thorbecke, Willem, 2014. "The contribution of the yen appreciation since 2007 to the Japanese economic debacle," Journal of the Japanese and International Economies, Elsevier, vol. 31(C), pages 1-15.
    3. repec:kap:openec:v:29:y:2018:i:1:d:10.1007_s11079-017-9457-9 is not listed on IDEAS
    4. Nie, Jun & Taylor, Lisa, 2013. "Economic growth in foreign regions and U.S. export growth," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 31-63.
    5. Styliani Christodoulopoulou & Oļegs Tkačevs, 2016. "Measuring the effectiveness of cost and price competitiveness in external rebalancing of euro area countries: What do alternative HCIs tell us?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(3), pages 487-531, August.
    6. Barry Bosworth & Susan M. Collins, 2010. "Rebalancing the US Economy in a Postcrisis World," Trade Working Papers 21877, East Asian Bureau of Economic Research.
    7. Bussière, Matthieu & Chudik, Alexander & Sestieri, Giulia, 2009. "Modelling global trade flows: results from a GVAR model," Working Paper Series 1087, European Central Bank.
    8. Konstantinos Chisiridis & Theodore Panagiotidis, 2017. "The Relationship Between Greek Exports and Foreign Regional Income," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 111, Hellenic Observatory, LSE.
    9. Frédéric Ghersi, 2018. "Macroeconomic modelling of electrified mobility systems in 2030 European Union," CIRED Working Papers hal-01691740, HAL.
    10. Willem Thorbecke & Atsuyuki Kato, 2011. "The Effect of Exchange Rate Changes on Japanese Consumption Exports," Macroeconomics Working Papers 23238, East Asian Bureau of Economic Research.
    11. Meredith A. Crowley & Xi Luo, 2011. "Understanding the great trade collapse of 2008–09 and the subsequent trade recovery," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 44-68.
    12. repec:spr:weltar:v:153:y:2017:i:3:d:10.1007_s10290-016-0274-9 is not listed on IDEAS
    13. Willem Thorbecke, 2015. "Understanding Japan's Capital Goods Exports," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 536-549, December.
    14. Elisabeth Beusch & Barbara Döbeli & Andreas M. Fischer & Pinar Yeşin, 2017. "Merchanting and Current Account Balances," The World Economy, Wiley Blackwell, vol. 40(1), pages 140-167, January.
    15. Christoph Fischer & Oliver Hossfeld & Karin Radeck, 2018. "On the Suitability of Alternative Competitiveness Indicators for Explaining Real Exports of Advanced Economies," Open Economies Review, Springer, vol. 29(1), pages 119-139, February.
    16. Kamath, Kishore & Paul, Varun, 2011. "Understanding recent developments in UK external trade," Bank of England Quarterly Bulletin, Bank of England, vol. 51(4), pages 294-304.
    17. Francesco Aiello & Graziella Bonanno & Alessia Via, 2015. "Again on trade elasticities: evidence from a selected sample of countries," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 259-287, December.
    18. Janet Ceglowski, 2014. "Has Trade Become More Responsive to Income? Assessing the Evidence for US Imports," Open Economies Review, Springer, vol. 25(2), pages 225-241, April.
    19. Francesco Aiello & Graziella Bonanno & Alessia Via, 2015. "New Evidence on Export Price Elasticity from China and Six OECD Countries," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(6), pages 56-78, November.
    20. Francesco Aiello & Graziella Bonanno & Alessia Via, 2014. "Do Export Price Elasticities Support Tensions In Currency Markets? Evidence From China And Six Oecd Countries," Working Papers 201405, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    21. Leon Podkaminer, 2017. "“Thirlwall’s Law” reconsidered," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(1), pages 29-57, February.

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    Keywords

    Balance of trade ; Trade ; Exports;

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