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

Matthieu Bussière · Fabio Pietro Ghironi · Giulia Sestieri · Norihiko Yamano

239 citations0/0 files storedAmerican Economic Journal Macroeconomics

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Global trade and economics Global Financial Crisis and Policies Economic Theory and Policy

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. (JEL E23, F14, F17, F44, G01)

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References

2001The nature and growth of vertical specialization in world trade 2011Accounting for intermediates: Production sharing and trade in value added 2004Advanced International Trade : Theory and Evidence Ed. 2 1969Income and Price Elasticities in World Trade 2009Exports and Financial Shocks 2011Off the cliff and back? Credit conditions and international trade during the global financial crisis 2008International Risk Sharing and the Transmission of Productivity Shocks 2005International Trade and Macroeconomic Dynamics with Heterogeneous Firms

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2011Trade Finance and the Great Trade Collapse 2013The Great Trade Collapse 2016Cardiac Arrest or Dizzy Spell 2018International Inflation Spillovers through Input Linkages 2017Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone 2018Global trade flows and economic policy uncertainty

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