Title: THE PRICE ELASTICITY OF EXTERNAL DEMAND: HOW DOES PORTUGAL COMPARE WITH OTHER EURO AREA COUNTRIES?
Abstract: AbstractThis paper estimates the price elasticity of external demand of Portuguese exports in the period 1995-2009and compares it with those of other euro area countries. This proxy of the export price elasticity is computedas a weighted average of the import demand elasticities in each individual country-product destination market,using the elasticities of substitution across imported varieties of Broda et al. (2006). Overall, Portugal tendsto export to individual markets which have, on average, a lower price elasticity than the markets where othereuro area countries export to. Therefore, the product and geographical composition of Portuguese exportsreduces their exposure to relative price fluctuations. Keywords: Imports, Exports, Trade elasticitiesJEL Codes: F12, F14 1 Introduction Trade elasticities are important parameters in international economics that have been exten-sively studied for several decades. At present, the empirical literature provides a wide rangeof estimates for trade elasticities with different methodologies and at different data break-down levels. The price elasticity of demand for exports measures the change in a country’sexports with respect to changes in the price of exported goods relative to the prices of com-peting goods in destination markets. This paper computes a proxy of the price elasticity ofexports as a weighted average of import demand elasticities using detailed trade data from1995 to 2009 for Portugal and other euro area countries.
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: preprint
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Cited By Count: 2
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