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Estimated Effects of Relative Prices on Trade Shares

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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.
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  • Ray C. Fair, 1981. "Estimated Effects of Relative Prices on Trade Shares," Cowles Foundation Discussion Papers 597, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:597
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    1. Oberhofer, W & Kmenta, J, 1974. "A General Procedure for Obtaining Maximum Likelihood Estimates in Generalized Regression Models," Econometrica, Econometric Society, vol. 42(3), pages 579-590, May.
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    1. Fair, Ray C, 1982. "Estimated Output, Price, Interest Rate, and Exchange Rate Linkages among Countries," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 507-535, June.
    2. Helliwell, John F. & Padmore, Tim, 1985. "Empirical studies of macroeconomic interdependence," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 21, pages 1107-1151, Elsevier.
    3. Ronald J. Shadbegian, 1998. "Do Tax and Expenditure Limitations Affect Local Government Budgets? Evidence From Panel Data," Public Finance Review, , vol. 26(2), pages 118-136, March.

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