How do we measure trade elasticity for services?

Satoshi Nakano () and Kazuhiko Nishimura ()
Additional contact information
Satoshi Nakano: Nihon Fukushi University
Kazuhiko Nishimura: Chukyo University

Empirical Economics, 2025, vol. 68, issue 3, No 15, 1477-1494

Abstract: Abstract This paper presents our attempt at identifying trade elasticities through variations in the exchange rate for possible applications to the case of services whose physical transactions are veiled in trade statistics. The regression analysis used to estimate elasticity entails a situation where the explanatory variable is leaked into the error term through the latent supply equation, causing an endogeneity problem for which an instrumental variable cannot be found. Our identification strategy is to utilize the normalizing condition, which enables the supply parameter to be identified, along with the reduced-form equation of the system of demand and supply equations. We evaluate the performance of the method proposed by applying it to several different tangible goods whose benchmark trade elasticities are estimable by utilizing information on their physical transactions.

Keywords: Trade in services; Armington elasticity; Endogeneity; Exchange rates (search for similar items in EconPapers)
JEL-codes: C51 F14 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00181-024-02675-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:68:y:2025:i:3:d:10.1007_s00181-024-02675-z

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-024-02675-z

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().