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Trade Elasticities and Market Expectations in Brazil

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  • Mr. Claudio A Paiva

Abstract

This paper provides econometric estimates of trade elasticities for Brazil obtained through cointegration and vector auto regression models and controlling for the effects of exchange rate volatility, capacity utilization, and changes in import tariffs. The results suggest that (i) recent market expectations may have been unduly pessimistic regarding the responsiveness of Brazil's trade flows to the real exchange rate, but (ii) the GDP growth rates targeted by the new government may put downward pressure on the exchange rate and thus render the achievement of official inflation targets considerably more difficult if structural reforms are not implemented.

Suggested Citation

  • Mr. Claudio A Paiva, 2003. "Trade Elasticities and Market Expectations in Brazil," IMF Working Papers 2003/140, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/140
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    References listed on IDEAS

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    1. Arize, Augustine C & Osang, Thomas & Slottje, Daniel J, 2000. "Exchange-Rate Volatility and Foreign Trade: Evidence from Thirteen LDC's," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 10-17, January.
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    8. Luiz Fernando Figueiredo & Pedro Fachada & Sérgio Goldenstein, 2002. "Monetary Policy in Brazil: Remarks on the Inflation Targeting Regime, Public Debt Management and Open Market Operations," Working Papers Series 37, Central Bank of Brazil, Research Department.
    9. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
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    12. Abdelhak Senhadji, 1998. "Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 236-268, June.
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    Cited by:

    1. Palazzo, Gabriel & Rapetti, Martín, 2023. "From macro to micro and macro back: Macroeconomic trade elasticities in a developing economy," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 223-252.
    2. repec:fgv:epgrbe:v:66:n:2:a:1 is not listed on IDEAS
    3. Samuel Carrasco & Diego Gianelli & Carolina Godoy, 2015. "Sensibilidad de las Exportaciones al TCR: Un Análisis Sectorial y por Destino," Working Papers Central Bank of Chile 745, Central Bank of Chile.
    4. Araujo, Aloisio & Leon, Marcia & Santos, Rafael, 2012. "Speculative attacks, openness and crises," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 66(2), June.
    5. Thierry Buchs, 2005. "Equilibrium Real Exchange Rate In Brazil Estimation And Policy Implications," International Trade 0502013, University Library of Munich, Germany.
    6. Brieuc Monfort, 2008. "Chile: Trade Performance, Trade Liberalization, and Competitiveness," IMF Working Papers 2008/128, International Monetary Fund.

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