Estimated Effects of Relative Prices on Trade Shares

25 Pages Posted: 18 Aug 2004

See all articles by Ray C. Fair

Ray C. Fair

Yale University - Cowles Foundation; Yale School of Management - International Center for Finance

Date Written: June 1981

Abstract

Estimated effects of relative prices on trade shares are presented in this paper for 64 countries. The equations are estimated using pooled time series, cross section data under the assumption that the error term is serially correlated across time and heteroskedastic across countries. The results strongly indicate that relative prices have an important effect on trade shares. The sensitivity of the properties of the multicountry model in Fair (1981a) to the endogenous treatment of trade shares is also examined. The addition of the trade share equations to the model has noticeable effects on the properties of the model regarding the effects of a depreciation. The sensitivity of trade shares to relative prices is an important channel in this version of the model through which a country's price of exports affects the demand for its exports.

Suggested Citation

Fair, Ray C., Estimated Effects of Relative Prices on Trade Shares (June 1981). NBER Working Paper No. w0696. Available at SSRN: https://ssrn.com/abstract=349093

Ray C. Fair (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3715 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://fairmodel.econ.yale.edu

Yale School of Management - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States
203-432-3715 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://fairmodel.econ.yale.edu

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