Estimating Price Responses of German Imports and Exports

John Chipman, Angelika Eymann, Gerd Ronning and Guoqiang Tian

MPRA Paper from University Library of Munich, Germany

Abstract: This paper estimates trade-demand functions for Germany from monthly data covering the period 1959-1988. It is assumed that these trade-demand functions have the form of the Linear Expenditure System, generated by a shifted Cobb-Douglas trade-utility function in which the shift parameter is postulated to be a function of time (including trend and seasonal components) and to have a stochastic term with a lognormal distribution. A procedure called generalized maximum likelihood is used, and the results are compared with those of nonlinear least squares as a benchmark. The approach is applied to two models: (1) a six-commodity model in which the dependent variables are net imports in six categories and the independent variables are six weighted averages of the import- and export-price indices for these categories as well as the trade deficit; (2) a twelve-commodity model in which the dependent variables are the gross imports and gross exports (the latter measured negatively) in the six categories and the independent variables are the twelve import- and export-price indices and the trade deficit. The latter model thus handles the case of “intra-industry trade”.

Keywords: Price Response; German Imports and Exports (search for similar items in EconPapers)
JEL-codes: E3 (search for similar items in EconPapers)
Date: 1992
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Published in European Integration in the World Economy (1992): pp. 574-637

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