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- Title
AN EMPIRICAL DEMAND AND SUPPLY MODEL OF MULTILATERAL TRADE.
- Authors
Geraci, Vincent J.; Prewo, Wilfried
- Abstract
The article presents an empirical model for the joint determination of the demand and supply for bilateral trade, in which both bilateral quantities and bilateral prices are endogenous. Authors use a two-tier construction in which total import demand and export supply are determined by aggregate real income and relative aggregate prices, and then bilateral trade flows are determined by theory-based allocations featuring relative bilateral prices. The model is estimated from a panel of bilateral trade flows covering the United States, Japan, France, Germany, and United Kingdom for the years 1958-1974. Some of the essential assumptions taken in the study are that the importing country's marginal rate of substitution between import bundles from any two countries is independent of the level of imports from any other country and the elasticity of substitution between any two import bundles competing in any market is the same as that between any other pair of import bundles competing in the same market.
- Subjects
SUPPLY &; demand; ECONOMIC models; ECONOMICS; COMMERCIAL products; INTERNATIONAL trade; ECONOMETRIC models; EMPIRICAL research; PRICES; DIRECT costing; COMPETITION
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 3, p432
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1925941