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Intra- and extra-euro area import demand for manufactures

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

No 532, Working Paper Series from European Central Bank

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 between 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 volatility and leads to substitution of trade away from higher-volatility regions towards lower-volatility regions. JEL Classification: C32, C33, E00, E32, O3

Keywords: intra- and extra-euro area imports; substitution; three stage least squares; trade integration (search for similar items in EconPapers)
Date: 2005-10
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Journal Article: Intra- and Extra-Euro Area Import Demand for Manufactures (2007)
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