Short-run and long-run industry-level estimates of U.S. Armington elasticities

Gallaway, Michael P.; McDaniel, Christine A.; Rivera, Sandra A.

doi:10.1016/s1062-9408(02)00101-8

Cited by 152 publications

(110 citation statements)

References 17 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…1 Where do these trade elasticities come from? CGE modelers typically draw the elasticities from econometric work that uses time series price variation to identify an elasticity of substitution between domestic goods and composite imports (Alaouze, 1977;Alaouze, Marsden, and Zeitsch, 1977;Stern et al, 1976;Gallaway, McDaniel and Rivera, 2003). This approach has three problems: the use of point estimates as "truth", downward bias in the magnitude of the point estimates created by problems in the estimation technique, and a mis-match between the data sample and source of variation in the econometric exercise and the policy experiment explored in the CGE exercise.…”

Section: Introductionmentioning

confidence: 99%

How confident can we be of CGE-based assessments of Free Trade Agreements?

et al. 2007

View full text Add to dashboard Cite

Computable General Equilibrium models, widely used for the analysis of Free Trade Agreements (FTAs) are often criticized for having poor econometric foundations. This paper improves the linkage between econometric estimates of key parameters and their usage in CGE analysis in order to better evaluate the likely outcome of a Free Trade Area of the Americas. Our econometric work focuses on estimation of a particular parameter, the elasticity of substitution among imports from different countries, which is especially critical for evaluating the positive and normative outcomes of FTAs. We match the data in the econometric exercise to the policy experiment at hand, and employ both point estimates and standard errors from the estimates.The FTAA analysis then takes explicit account of the degree of uncertainty in the underlying parameters. We sample from a distribution of parameter values given by our econometric estimates in order to generate a distribution of model results, from which we can construct confidence intervals. We find that imports increase in all regions of the world as a result of the FTAA, and this outcome is robust to variation in the trade elasticities. Ten of the thirteen FTAA regions experience a welfare gain in which we are more than 95% confident. We conclude that there is great potential for combining econometric work with CGE-based policy analysis in order to produce a richer set of results that are likely to prove more satisfying to the sophisticated policy maker. (Financial Times, 2003)

show abstract

Section: Introductionmentioning

confidence: 99%

How confident can we be of CGE-based assessments of Free Trade Agreements?

et al. 2007

View full text Add to dashboard Cite

show abstract

“…Even when such a dataset is available, it still poses great restrictions such as inevitable averaging out of the developmental change when using longitudinal data to analyze the economy. As shown in Gallaway et al (2003), and noted in Feenstra et al (2018), long-run estimate results of Armington elasticities tend to be greater, at times by fivefold, than short-run estimates. Hence, for an economy that has experienced drastic change as that of Korea, it is quite unsuitable to use long time series data covering several decades to investigate the recent economy.…”

Section: Parameter Estimationmentioning

confidence: 75%

The effects of external shocks on the Korean economy: CGE model-based analysis

Lee

Kim

2018

Economic Structures

View full text Add to dashboard Cite

“…As discussed in studies such as by Drozd and Nosal (2012), Gallaway, McDaniel, andRivera (2003) andMc Daniel andBalistreri (2003), another robust …nding in the empirical literature is that long-run estimates are higher than short-run estimates. The di¤erence between longrun and short-run is determined by the time horizon that corresponds to using annual, quarterly or monthly data in empirical studies.…”

Section: Elasticitiesmentioning

confidence: 95%

Unifying Macro Elasticities in International Economics

Yilmazkuday

2017

gwp

View full text Add to dashboard Cite

International trade studies have higher macro (Armington) elasticity measures compared to international finance studies. This observation has evoked not only mixed policy implications regarding tariffs and exchange rates but also mixed welfare gains from trade. Regarding the policy implications, this so-called international elasticity puzzle is solved in this paper by distinguishing between elasticities of substitution and price elasticities of demand that are connected to each other through expenditure shares. It is shown theoretically and confirmed empirically that the macro elasticity in international trade is a weighted average of the macro elasticity in international finance and the elasticity of substitution across products of foreign countries. It is implied that one can always find an elasticity of substitution across foreign countries that would be consistent with different macro elasticities in the two literatures; therefore, the puzzle is something artificial due to the way that the foreign products are aggregated at destination countries. Regarding the welfare gains from trade, the two literatures are shown to have the very same implications when international finance studies have a unitary macro elasticity of substitution between home and foreign products or unitary terms of trade. As opposed to the existing literature that has offered many supplyside solutions to the puzzle, the results in this paper are independent of the supply side and thus are consistent with any production structure.

show abstract

Short-run and long-run industry-level estimates of U.S. Armington elasticities

Cited by 152 publications

References 17 publications

How confident can we be of CGE-based assessments of Free Trade Agreements?

How confident can we be of CGE-based assessments of Free Trade Agreements?

The effects of external shocks on the Korean economy: CGE model-based analysis

Unifying Macro Elasticities in International Economics

Contact Info

Product

Resources

About