Determinants of Argentina’s External Trade

This paper presents new estimates of export and import equations for Argentina, using a broader set of variables than previous studies and distinguishing between intra- and extra-MERCOSUR trade. It measures the importance of relative price versus income effects in accounting for the higher trade deficit during the 1990s, and examines whether foreign trade elasticities have increased as a result of structural changes in the economy. It finds that the high income elasticity of imports and the responsiveness of exports to changes in world commodity prices, domestic absorption, and economic activity in Brazil have been key determinants of Argentina's trade balance.
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Volume/Issue: Volume 1999 Issue 121
Publication date: September 1999
ISBN: 9781451854367
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Business and Economics , Exports and Imports , Economics- Macroeconomics , WP , exchange rate , price elasticity , foreign trade , income elasticity of imports , Argentina , Foreign Trade Elasticities , International Competitiveness , MERCOSUR , commodity export price , A , export supply equation , Argentina's export , export supply function , export equation , B , export supply , import function , aggregate import function , import demand , income elasticity , price indicator , Exports , Imports , Real exchange rates , Trade balance , Export prices , Western Hemisphere , South America

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Summary

This paper presents new estimates of export and import equations for Argentina, using a broader set of variables than previous studies and distinguishing between intra- and extra-MERCOSUR trade. It measures the importance of relative price versus income effects in accounting for the higher trade deficit during the 1990s, and examines whether foreign trade elasticities have increased as a result of structural changes in the economy. It finds that the high income elasticity of imports and the responsiveness of exports to changes in world commodity prices, domestic absorption, and economic activity in Brazil have been key determinants of Argentina’s trade balance.

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