Empirical Estimation of Trend and Cyclical Export Elasticities

46 Pages Posted: 5 Oct 2011

See all articles by Jane Haltmaier

Jane Haltmaier

Board of Governors of the Federal Reserve System

Date Written: September 30, 2011

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.

Keywords: exports, cycles, forecasting

JEL Classification: E32, F17

Suggested Citation

Haltmaier, Jane, Empirical Estimation of Trend and Cyclical Export Elasticities (September 30, 2011). FRB International Finance Discussion Paper No. 1030. Available at SSRN: https://ssrn.com/abstract=1939035 or http://dx.doi.org/10.2139/ssrn.1939035

Jane Haltmaier (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2374 (Phone)
202-736-5638 (Fax)

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