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Empirical estimation of trend and cyclical export elasticities

Jane Haltmaier

No 1030, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper uses an adaptation of Vahid and Engle's common trend/common cycle analysis to estimate trend and cyclical export elasticities for trading partner income and real exchange rates for 36 countries. For the countries for which both types of income elasticities can be identified, the cyclical elasticity is on average more than twice as large as the trend elasticity. The methodology is applied to forecasting exports during the recent cycle and it appears to improve on simpler models for about half of the countries. For an aggregate of all of the countries for which separate elasticities can be identified, the RMSE is about half as large for the trend/cycle model as for the simple model.

Date: 2011
New Economics Papers: this item is included in nep-for and nep-int
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