Trade Elasticities and Market Expectations in Brazil

Claudio Paiva

No 2003/140, IMF Working Papers from International Monetary Fund

Abstract: This paper provides econometric estimates of trade elasticities for Brazil obtained through cointegration and vector auto regression models and controlling for the effects of exchange rate volatility, capacity utilization, and changes in import tariffs. The results suggest that (i) recent market expectations may have been unduly pessimistic regarding the responsiveness of Brazil's trade flows to the real exchange rate, but (ii) the GDP growth rates targeted by the new government may put downward pressure on the exchange rate and thus render the achievement of official inflation targets considerably more difficult if structural reforms are not implemented.

Keywords: WP; import volume; Trade; elasticities; exchange rate; cointegration models; trade elasticity pessimism; export volume; import elasticity; oil imports; export elasticity; import equation; import model; Imports; Exports; Real effective exchange rates; Exchange rates; Capacity utilization (search for similar items in EconPapers)
Pages: 23
Date: 2003-07-01
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Citations: View citations in EconPapers (6)

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