Intra- and Extra-Euro Area Import Demand for Manufactures

Robert Anderton, Badi Baltagi, Frauke Skudelny () and Nuno Sousa

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2007, vol. 53, issue 3, 221-241

Abstract: The aim of this paper is to improve our understanding of the key determinants of intra- and extra-euro area imports. Using a simultaneous equation estimation framework, and pooling the data across nine euro area countries as an approximation of the euro area, we estimate intra- and extra-euro area import demand functions and impose various restrictions within and across equations. We find that there are significant substitution effects btween intra- and extra-euro area imports due to changes in their relative prices, while exchange rate volatility decreases trade vis-à-vis regions characterised by high volatility and leads to substitution of trade away from higher-volatility regions towards lower-volatility regions.

Keywords: intra- and extra-euro area imports; substitution; trade integration; three stage least squares (search for similar items in EconPapers)
JEL-codes: F10 F15 (search for similar items in EconPapers)
Date: 2007
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Working Paper: Intra- and extra-euro area import demand for manufactures (2005)
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