From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy

A long tradition in economic theory has seen the real exchange rate (RER) as a key determinant of trade performance. Several empirical studies, however, have found low estimates of macro trade elasticities and, as a result, questioned this argument. In this paper, we show that to understand and esti...

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Autores principales:	Palazzo, Gabriel, Rapetti, Martín
Formato:	Artículo publishedVersion
Lenguaje:	Inglés
Publicado:	Instituto Interdisciplinario de Economía Política (IIEP UBA-CONICET) 2022
Materias:	Elasticidades del comercio exterior Tipo de cambio real Países en desarrollo Estructura productiva Trade elasticity Real exchange rates Developing countries Productive structure
Acceso en línea:	https://ojs.economicas.uba.ar/DT-IIEP/article/view/2468 https://repositoriouba.sisbi.uba.ar/gsdl/cgi-bin/library.cgi?a=d&c=dociiep&d=2468_oai
Aporte de:	Repositorio Digital de la Universidad de Buenos Aires (UBA) de Universidad de Buenos Aires

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institution	Universidad de Buenos Aires
institution_str	I-28
repository_str	R-145
collection	Repositorio Digital de la Universidad de Buenos Aires (UBA)
language	Inglés
orig_language_str_mv	eng
topic	Elasticidades del comercio exterior Tipo de cambio real Países en desarrollo Estructura productiva Trade elasticity Real exchange rates Developing countries Productive structure
spellingShingle	Elasticidades del comercio exterior Tipo de cambio real Países en desarrollo Estructura productiva Trade elasticity Real exchange rates Developing countries Productive structure Palazzo, Gabriel Rapetti, Martín From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy
topic_facet	Elasticidades del comercio exterior Tipo de cambio real Países en desarrollo Estructura productiva Trade elasticity Real exchange rates Developing countries Productive structure
description	A long tradition in economic theory has seen the real exchange rate (RER) as a key determinant of trade performance. Several empirical studies, however, have found low estimates of macro trade elasticities and, as a result, questioned this argument. In this paper, we show that to understand and estimate the effect of RER on trade performance, it is crucial to explore the existence of heterogeneous responses of individual products to RER movements. Using trade data from Argentina, we employ the Mean Group method to estimate macro trade elasticities by individual products disaggregated at four digits of the SITC; rev.2. We find a wide range of heterogeneous responses of exports and imports to RER movements at the individual product level. We find that the estimated RER-elasticities in differentiated products and labor-intensive manufacturing goods are substantially larger than those of primary and homogeneous products. Based on the estimated elasticities at the product level, we obtain a “low” aggregate RER-elasticity of exports when we weigh them by the country’s trade basket. We show that this result is a consequence of Argentina’s economic structure, a country whose exports are heavily specialized in primary and homogeneous products. Our results are important because they help build a bridge between two conflicting views in the RER-economic development literature. Even in countries with ``low’’ aggregate macro RER-elasticities, the real exchange rate may be an important variable for economic performance. An undervalued RER, for instance, may facilitate economic growth by stimulating investment in activities producing more complex/differentiated goods in countries that specialize in the production of primary and homogenous goods and, as a result, have “low” trade elasticities. This seems to be the case of several countries in Latin America, including Argentina.
format	Artículo publishedVersion
author	Palazzo, Gabriel Rapetti, Martín
author_facet	Palazzo, Gabriel Rapetti, Martín
author_sort	Palazzo, Gabriel
title	From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy
title_short	From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy
title_full	From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy
title_fullStr	From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy
title_full_unstemmed	From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy
title_sort	from macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy
publisher	Instituto Interdisciplinario de Economía Política (IIEP UBA-CONICET)
publishDate	2022
url	https://ojs.economicas.uba.ar/DT-IIEP/article/view/2468 https://repositoriouba.sisbi.uba.ar/gsdl/cgi-bin/library.cgi?a=d&c=dociiep&d=2468_oai
work_keys_str_mv	AT palazzogabriel frommacrotomicroandmacrobackmacroeconomictradeelasticitiesinadevolopingeconomy AT rapettimartin frommacrotomicroandmacrobackmacroeconomictradeelasticitiesinadevolopingeconomy AT palazzogabriel delomacroalomicroyotravezalamacroelasticidadesmacroeconomicasenunaeconomiaendesarrollo AT rapettimartin delomacroalomicroyotravezalamacroelasticidadesmacroeconomicasenunaeconomiaendesarrollo
_version_	1825551331482402816
spelling	I28-R145-2468_oai2025-02-11 Palazzo, Gabriel Rapetti, Martín 2022-11-28 A long tradition in economic theory has seen the real exchange rate (RER) as a key determinant of trade performance. Several empirical studies, however, have found low estimates of macro trade elasticities and, as a result, questioned this argument. In this paper, we show that to understand and estimate the effect of RER on trade performance, it is crucial to explore the existence of heterogeneous responses of individual products to RER movements. Using trade data from Argentina, we employ the Mean Group method to estimate macro trade elasticities by individual products disaggregated at four digits of the SITC; rev.2. We find a wide range of heterogeneous responses of exports and imports to RER movements at the individual product level. We find that the estimated RER-elasticities in differentiated products and labor-intensive manufacturing goods are substantially larger than those of primary and homogeneous products. Based on the estimated elasticities at the product level, we obtain a “low” aggregate RER-elasticity of exports when we weigh them by the country’s trade basket. We show that this result is a consequence of Argentina’s economic structure, a country whose exports are heavily specialized in primary and homogeneous products. Our results are important because they help build a bridge between two conflicting views in the RER-economic development literature. Even in countries with ``low’’ aggregate macro RER-elasticities, the real exchange rate may be an important variable for economic performance. An undervalued RER, for instance, may facilitate economic growth by stimulating investment in activities producing more complex/differentiated goods in countries that specialize in the production of primary and homogenous goods and, as a result, have “low” trade elasticities. This seems to be the case of several countries in Latin America, including Argentina. Una larga tradición en la teoría económica ha considerado al tipo de cambio real (TCR) como un determinante clave del resultado de la balanza comercial. Sin embargo, varios estudios empíricos han encontrado estimaciones bajas de las elasticidades del comercio exterior a nivel agregado y, en consecuencia, han cuestionado este argumento. En este trabajo, mostramos que para entender y estimar el efecto del TCR sobre la balanza comercial es crucial explorar la existencia de respuestas heterogéneas de los diferentes productos transables respecto a los movimientos del TCR. Utilizando datos del comercio exterior de Argentina a cuatro dígitos de de desagregación del CUCI; rev.2, estimamos las elasticidades macroeconómicas del comercio exterior a través del método del Mean Group, el cual permite heterogeneidad de respuesta entre productos en las estimaciones. Encontramos una amplia gama de respuestas heterogéneas de las exportaciones e importaciones a los movimientos del TCR a nivel de producto. La elasticidad estimada del TCR en los productos diferenciados y en los bienes manufactureros de uso intensivo de mano de obra es sustancialmente mayor que la de los productos primarios y homogéneos. Partiendo de las elasticidades estimadas a nivel de producto, obtenemos una “baja” elasticidad-TCR agregada de las exportaciones cuando las ponderamos por la canasta comercial de Argentina. Mostramos que este resultado es una consecuencia de la estructura económica del país, debido a que las exportaciones están fuertemente especializadas en productos primarios y homogéneos. Consideramos estos resultados relevantes ya que permiten tender un puente entre dos visiones contradictorias en la literatura sobre el desarrollo económico y el rol del TCR. Incluso en países con “bajas” elasticidades agregadas, el tipo de cambio real puede ser una variable importante para el desempeño económico de largo plazo. Un tipo de cambio real competitivo y estable, por ejemplo, puede facilitar el crecimiento económico al estimular la inversión en actividades de producción de bienes más complejos/diferenciados en países que se especializan en la producción de bienes primarios y homogéneos y, por tanto, tienen “bajas” elasticidades agregadas. Este parece ser el caso de varios países de América Latina, entre ellos Argentina. application/pdf https://ojs.economicas.uba.ar/DT-IIEP/article/view/2468 eng Instituto Interdisciplinario de Economía Política (IIEP UBA-CONICET) https://ojs.economicas.uba.ar/DT-IIEP/article/view/2468/3205 Documentos de trabajo del Instituto Interdisciplinario de Economía Política; Núm. 74 (2022): Elasticidades macroeconómicas desagregadas del comercio exterior de Argentina; 1-56 Working Papers series at Instituto Interdisciplinario de Economía Política; No. 74 (2022): From macro to micro and macro back: macroeconomic trade elasticities in a developing economy; 1-56 2451-5728 Elasticidades del comercio exterior Tipo de cambio real Países en desarrollo Estructura productiva Trade elasticity Real exchange rates Developing countries Productive structure From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy De lo macro a lo micro y otra vez a la macro: elasticidades macroeconómicas en una economía en desarrollo info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion https://repositoriouba.sisbi.uba.ar/gsdl/cgi-bin/library.cgi?a=d&c=dociiep&d=2468_oai

From macro to micro and macro back: macroeconomic trade elasticities in a devoloping economy

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