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The Aggregate Of Elasticities Or The Elasticity Of The Aggregates: U.S. Trade In Services

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  • Jaime Marquez

Abstract

I use the automated search algorithm to address practical issues that arise in estimating income and price elasticities for U.S. trade in services: specification of dynamics, specification of the search strategy, simultaneity biases, and aggregation biases. Specifically, starting from a general, autoregressive distributed lag formulation, I use automated specification algorithms to obtain a specific formulation. I assess simultaneity biases by applying OLS, IV, and FIML. I assess aggregation biases by comparing the aggregate of the elasticities to the elasticity of the aggregate. Ignoring these considerations results in a formulation that cannot explain the divergence of service and merchandise balances

Suggested Citation

  • Jaime Marquez, 2005. "The Aggregate Of Elasticities Or The Elasticity Of The Aggregates: U.S. Trade In Services," Computing in Economics and Finance 2005 142, Society for Computational Economics.
  • Handle: RePEc:sce:scecf5:142
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    File URL: http://repec.org/sce2005/up.8581.1106855014.pdf
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    Keywords

    Automated Search; Simultaneity and Aggregation Bias;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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