Intra- and Extra-Euro Area Import Demand for Manufacturers

36 Pages Posted: 8 Nov 2005

See all articles by Robert Anderton

Robert Anderton

European Central Bank (ECB)

Badi H. Baltagi

Syracuse University - Maxwell School of Citizenship and Public Affairs; IZA Institute of Labor Economics; Syracuse University - Center for Policy Research

Frauke Skudelny

European Central Bank (ECB)

Nuno Sousa

European Commission, DG II

Date Written: October 2005

Abstract

The aim of this paper is to improve our understanding of the key determinants of intra- and extra-euro area imports. Using a simultaneous equation estimation framework, and pooling the data across nine euro area countries as an approximation of the euro area, we estimate intra- and extra-euro area import demand functions and impose various restrictions within and across equations. We find that there are significant substitution effects between intra- and extra-euro area imports due to changes in their relative prices, while exchange rate volatility decreases trade vis-a-vis regions characterised by volatility and leads to substitution of trade away from higher-volatility regions towards lower-volatility regions.

Keywords: intra- and extra-euro area imports, substitution, trade integration, three stage least squares

JEL Classification: F10, F15

Suggested Citation

Anderton, Robert and Baltagi, Badi H. and Skudelny, Frauke and Sousa, Nuno, Intra- and Extra-Euro Area Import Demand for Manufacturers (October 2005). ECB Working Paper No. 532, Available at SSRN: https://ssrn.com/abstract=814484

Robert Anderton (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
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0044 69 1344 6000 (Fax)

Badi H. Baltagi

Syracuse University - Maxwell School of Citizenship and Public Affairs ( email )

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Syracuse, NY 13244
United States

IZA Institute of Labor Economics

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Syracuse University - Center for Policy Research ( email )

Syracuse, NY 13244
United States
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315-443-1081 (Fax)

HOME PAGE: http://www.maxwell.syr.edu/cpr_about.aspx?id=6442451316

Frauke Skudelny

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Nuno Sousa

European Commission, DG II ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

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