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LIML Estimation of Import Demand and Export Supply Elasticities

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  • Vahagn Galstyan

    () (Department of Economics, Trinity College Dublin)

Abstract

Following the seminal contribution of Feenstra (1994), I apply limited-information maximum likelihood to estimate import demand and export supply elasticities for a range of eurozone countries. The results highlight substantial inconsistencies in the parameters estimated by the methodology of Fuller (1977) relative to the parameters estimated by the methodology of Hausman et al (2012). The nature of the structural equations reveals complications generated by the limiting behavior of the parameters that can be replicated in finite samples. The results of simulations underscore substantial improvements in parameter estimates in a three-dimensional panel, suggesting that the problem of limiting behaviour can be overcome in larger dataset/panels.

Suggested Citation

  • Vahagn Galstyan, 2016. "LIML Estimation of Import Demand and Export Supply Elasticities," Trinity Economics Papers tep0316, Trinity College Dublin, Department of Economics, revised Jun 2016.
  • Handle: RePEc:tcd:tcduee:tep0316
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    References listed on IDEAS

    as
    1. Jerry A. Hausman & Whitney K. Newey & Tiemen Woutersen & John C. Chao & Norman R. Swanson, 2012. "Instrumental variable estimation with heteroskedasticity and many instruments," Quantitative Economics, Econometric Society, vol. 3(2), pages 211-255, July.
    2. Soderbery, Anson, 2015. "Estimating import supply and demand elasticities: Analysis and implications," Journal of International Economics, Elsevier, vol. 96(1), pages 1-17.
    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    4. Soderbery, Anson, 2010. "Investigating the asymptotic properties of import elasticity estimates," Economics Letters, Elsevier, vol. 109(2), pages 57-62, November.
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    More about this item

    Keywords

    LIML; elasticity;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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