Elasticity Optimism
Copyright policy )Elasticity Optimism
On average, estimates of trade elasticities are smaller in aggregate data than at sector level. This is an artifact of aggregation. Estimations performed on aggregate data constrain sector elasticities to homogeneity, which creates a heterogeneity bias. The paper shows such a bias exists in two prominent approaches used to estimate elasticities, which has meaningful consequences for the calibration of the trade elasticity in one-sector, aggregative models. With elasticities calibrated to aggregate data, macroeconomic models can have predictions at odds with the implications of their multi-sector counterparts. They do not when elasticities are calibrated using a weighted average of sector elasticities. (JEL C51, F13, F14, F41, O19)
Aggregation; Calibration; Global Imbalances; International Portfolio; International Transmission; Monetary Policy; Trade Elasticities, JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation, JEL: O - Economic Development, 330, and Growth/O.O1 - Economic Development/O.O1.O19 - International Linkages to Development • Role of International Organizations, Trade Elasticities, Aggregation, Calibration, Global Imbalances, International Transmission, International Portfolio, Monetary Policy, Trade, Innovation, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, JEL: F - International Economics/F.F4 - Macroeconomic Aspects of International Trade and Finance/F.F4.F41 - Open Economy Macroeconomics, JEL: F - International Economics/F.F1 - Trade/F.F1.F14 - Empirical Studies of Trade, [SHS.ECO]Humanities and Social Sciences/Economics and Finance, Technological Change, Homogeneity, JEL: F - International Economics/F.F1 - Trade/F.F1.F13 - Trade Policy • International Trade Organizations, Heterogeneity, Monetary Policy,Elasticités du Commerce,Agrégation,Déséquilibres Globaux,Transmission Internationale,Politique Monétaire.,Monetary Policy.,International Portfolio,International Transmission,Global Imbalances,Calibration,Aggregation,Trade Elasticities, Estimation, jel: jel:F21, jel: jel:F41, jel: jel:C51, jel: jel:F32, jel: jel:F13, jel: jel:F14, jel: jel:O19
Aggregation; Calibration; Global Imbalances; International Portfolio; International Transmission; Monetary Policy; Trade Elasticities, JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation, JEL: O - Economic Development, 330, and Growth/O.O1 - Economic Development/O.O1.O19 - International Linkages to Development • Role of International Organizations, Trade Elasticities, Aggregation, Calibration, Global Imbalances, International Transmission, International Portfolio, Monetary Policy, Trade, Innovation, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, JEL: F - International Economics/F.F4 - Macroeconomic Aspects of International Trade and Finance/F.F4.F41 - Open Economy Macroeconomics, JEL: F - International Economics/F.F1 - Trade/F.F1.F14 - Empirical Studies of Trade, [SHS.ECO]Humanities and Social Sciences/Economics and Finance, Technological Change, Homogeneity, JEL: F - International Economics/F.F1 - Trade/F.F1.F13 - Trade Policy • International Trade Organizations, Heterogeneity, Monetary Policy,Elasticités du Commerce,Agrégation,Déséquilibres Globaux,Transmission Internationale,Politique Monétaire.,Monetary Policy.,International Portfolio,International Transmission,Global Imbalances,Calibration,Aggregation,Trade Elasticities, Estimation, jel: jel:F21, jel: jel:F41, jel: jel:C51, jel: jel:F32, jel: jel:F13, jel: jel:F14, jel: jel:O19
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