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LIML estimation of import demand and export supply elasticities

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  • Vahagn Galstyan

Abstract

I apply limited-information maximum likelihood (LIML) to estimate import demand and export supply elasticities for a range of eurozone countries. The results highlight inconsistencies in the parameters estimated by LIML relative to an estimator that is robust to heteroskedasticity. The nature of the structural equations reveals complications generated by the limiting behavior of the parameters that can be replicated in finite samples. The results of simulations underscore improvements in parameter estimates in a three-dimensional panel, suggesting that the problem of limiting behaviour can be overcome in larger dataset/panels.

Suggested Citation

  • Vahagn Galstyan, 2018. "LIML estimation of import demand and export supply elasticities," Applied Economics, Taylor & Francis Journals, vol. 50(17), pages 1910-1918, April.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:17:p:1910-1918
    DOI: 10.1080/00036846.2017.1380291
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    References listed on IDEAS

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    3. Soderbery, Anson, 2015. "Estimating import supply and demand elasticities: Analysis and implications," Journal of International Economics, Elsevier, vol. 96(1), pages 1-17.
    4. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    5. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    6. Guillaume Gaulier & Isabelle Méjean, 2006. "Import Prices, Variety and the Extensive Margin of Trade," Working Papers 2006-17, CEPII research center.
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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