Elasticity Optimism

Jean M. Imbs () and Isabelle Mˆmjean
Additional contact information
Isabelle Mˆmjean: Ecole Polytechnique
Authors registered in the RePEc Author Service: Isabelle Méjean ()

No 242008, Working Papers from Hong Kong Institute for Monetary Research

Abstract: Estimates of the elasticity of substitution between domestic and foreign varieties are small in macroeconomic data, but substantially larger in disaggregated microeconomic studies. This may be an artifact of heterogeneity. We use disaggregated multilateral trade data to structurally identify elasticities of substitution in US goods. We spell out a partial equilibrium model to aggregate them adequately at the country level. We compare aggregate elasticities that impose equality across sectors, to estimates allowing for heterogeneity. The former are similar in value to conventional macroeconomic estimates; but they are more than twice larger -up to 5 - with heterogeneity. The parameter is central to calibrated models in most of international economics. We discuss the difference our corrected estimate makes in various areas of international economics, including the dynamics of external balances, the international transmission of shocks, international portfolio choice and optimal monetary policy.

Keywords: Trade Elasticities; Aggregation; Calibration; Global Imbalances; International Transmission; International Portfolio; Monetary Policy (search for similar items in EconPapers)
JEL-codes: F41 F32 F21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-opm
Date: 2008-12
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.hkimr.org/cms/upload/publication_app/pu ... HKIMR%20No.24_BW.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: Elasticity Optimism (2009)
Working Paper: Elasticity optimism (2009)
Working Paper: Elasticity Optimism (2009)
Working Paper: Elasticity Optimism (2008)
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: http://EconPapers.repec.org/RePEc:hkm:wpaper:242008

Access Statistics for this paper

More papers in Working Papers from Hong Kong Institute for Monetary Research
Contact information at EDIRC.
Series data maintained by HKIMR ().