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Trade Elasticities and Market Expectations in Brazil
Author:
Mr. Claudio A Paiva
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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 140
Language:
English
Publication Date:
01 Jul 2003
DOI:
https://doi.org/10.5089/9781451856149.001
ISBN:
9781451856149
ISSN:
1018-5941
Pages:
23
Keywords:
WP; import volume; Trade; elasticities; exchange rate; cointegration models; trade elasticity pessimism; export volume; import elasticity; oil imports; export elasticity; import equation; import model; Imports; Exports; Real effective exchange rates; Exchange rates; Capacity utilization
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper provides econometric estimates of trade elasticities for Brazil obtained through cointegration and vector auto regression models and controlling for the effects of exchange rate volatility, capacity utilization, and changes in import tariffs. The results suggest that (i) recent market expectations may have been unduly pessimistic regarding the responsiveness of Brazil's trade flows to the real exchange rate, but (ii) the GDP growth rates targeted by the new government may put downward pressure on the exchange rate and thus render the achievement of official inflation targets considerably more difficult if structural reforms are not implemented.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund