Elasticity optimism

Jean Imbs and Isabelle Mejean

Working Papers from HAL

Abstract: Estimates of the elasticity of substitution between domestic and foreign varieties are small in macroeconomic data, and substantially larger in disaggregated 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 7- 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: Monetary Policy; Elasticités du Commerce; Agrégation; Déséquilibres Globaux; Transmission Internationale; Politique Monétaire.; Trade Elasticities; Aggregation; Calibration; Global Imbalances; International Transmission; International Portfolio; Monetary Policy. (search for similar items in EconPapers)
Date: 2009-02
Note: View the original document on HAL open archive server: https://hal.science/hal-00362403
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Citations: View citations in EconPapers (44)

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Related works:
Journal Article: Elasticity Optimism (2015)
Working Paper: Elasticity Optimism (2015)
Working Paper: Elasticity Optimism (2015)
Working Paper: Elasticity Optimism (2015)
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Working Paper: Elasticity Optimism (2008)
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