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Estimating the Trade Elasticity over Time

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  • Hakan Yilmazkuday

    (Department of Economics, Florida International University)

Abstract

Using quarterly data on the U.S. imports from its major trading partners and the corresponding trade costs, this paper estimates the trade elasticity by using a panel structural vector autoregressive model that can distinguish between short-run versus long-run elasticity measures in a continuous way and is robust to any endogeneity problem. The estimated trade elasticity measures are highly consistent with studies in alternative literatures, suggesting a short-run value of about 1 (after one quarter), a medium-run value of about 5 (after one year), and a long-run value of about 7 (after five years).

Suggested Citation

  • Hakan Yilmazkuday, 2019. "Estimating the Trade Elasticity over Time," Working Papers 1903, Florida International University, Department of Economics.
    • Handle: RePEc:fiu:wpaper:1903
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hakan Yilmazkuday, 2021. "Welfare costs of bilateral currency crises: The role of international trade," International Finance, Wiley Blackwell, vol. 24(1), pages 119-131, April.
    2. Hakan Yilmazkuday, 2021. "Welfare costs of travel reductions within the United States due to COVID‐19," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(S1), pages 18-31, November.
    3. Christoph E. Boehm & Andrei A. Levchenko & Nitya Pandalai-Nayar, 2023. "The Long and Short (Run) of Trade Elasticities," American Economic Review, American Economic Association, vol. 113(4), pages 861-905, April.
    4. Khan, Shafaat Yar & Khederlarian, Armen, 2021. "How does trade respond to anticipated tariff changes? Evidence from NAFTA," Journal of International Economics, Elsevier, vol. 133(C).
    5. Hakan Yilmazkuday, 2021. "Welfare Costs of Travel Reductions within the U.S. due to COVID-19," Working Papers 2114, Florida International University, Department of Economics.
    6. Carter Mix, 2023. "The Dynamic Effects Of Multilateral Trade Policy With Export Churning," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 653-689, May.
    7. James E. Anderson & Yoto V. Yotov, 2022. "Estimating Gravity from the Short to the Long Run: A Simple Solution to the 'International Elasticity Puzzle'," NBER Working Papers 30809, National Bureau of Economic Research, Inc.
    8. Yilmazkuday, Hakan, 2024. "Diminishing gains from trade across countries: Interaction between trade elasticity and openness," Journal of International Money and Finance, Elsevier, vol. 141(C).
    9. Hu, Yushan & Zhang, Penglong, 2021. "Semiparametric estimation of varying trade elasticities in gravity," Economics Letters, Elsevier, vol. 209(C).
    10. Khan,Shafaat Yar & Khederlarian, Armen, 2021. "Inventories, Input Costs, and Productivity Gains from Trade Liberalizations," Policy Research Working Paper Series 9564, The World Bank.

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    More about this item

    Keywords

    Trade Elasticity; Short-run; Medium-run; Long-run;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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    This paper has been announced in the following NEP Reports:

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