- 21 July 2005
- WORKING PAPER SERIES - No. 503World trade and global integration in production processes: a re-assessment of import demand equationsDetails
- It is common to observe that demand elasticities in trade equations for imports are implausibly large, and that they differ between countries. Both of these present us with problems, as they imply trade will rise without bound as a proportion of GDP. The research reported here looks for alternative empirical evidence of possible factors driving the increase in trade as a proportion of GDP. We show that the inclusion of the ratios of outward and inward FDI to GDP as additional openness and globalisation indicators appear to remove the spurious accuracy with which we are measuring demand elasticities.
- JEL Code
- F10 : International Economics→Trade→General
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business