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Income and Price Elasticities of Croatian Trade – A Panel Data Approach

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  • Vida Bobić

Abstract

This paper deals with the estimation of price and income elasticities of Croatian trade flows using disaggregated data by industries for the period after Croatia joined the WTO in 2000 and until 2007. Export and import demand functions are estimated for total merchandise trade as well as for several partner country subsamples, with controls for other potential trade flow determinants, such as the exchange rate, tariffs, FDI inflows and credit supply to particular industries. Given the dynamic nature of the studied flows and potential endogeneity issues, the models were estimated using the ArellanoBond method (1991). The results indicate that the sensitivity of both exports and imports to prices is relatively low, while income effects are stronger. These results are confirmed in all the country subsamples. The influence of other factors, however, does not appear to be as stable or uniform across country subsamples.

Suggested Citation

  • Vida Bobić, 2010. "Income and Price Elasticities of Croatian Trade – A Panel Data Approach," Working Papers 25, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:wpaper:25
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    References listed on IDEAS

    as
    1. Mr. Abdelhak S Senhadji, 1997. "Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis," IMF Working Papers 1997/132, International Monetary Fund.
    2. Goran Vuksic, 2005. "Impact of foreign direct investment on Croatian manufacturing exports," Financial Theory and Practice, Institute of Public Finance, vol. 29(2), pages 131-158.
    3. Marquez, Jaime, 1990. "Bilateral Trade Elasticities," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 70-77, February.
    4. Abdelhak S. Senhadji & Claudio E. Montenegro, 1999. "Time Series Analysis of Export Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 1-2.
    5. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-125, May.
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    More about this item

    Keywords

    trade modelling; income and price elasticities; panel data;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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