Price Elasticities in International Trade

Estimates of the response of imports and exports to price changes are interesting and important for a variety of purposes. On an aggregate level, the investigator or policy maker may wish to know what effects exchange-rate realignments may have on the trade balances of different countries. Or, put differently, the problem may be to determine the exchange-rate change required to eliminate a trade imbalance of a given size. Exchange-rate changes will also affect aggregate income and employment as a consequence of the expenditure shifts that occur and that result in the expansion or contraction of a country’s export and import-competing industries. To cope with issues like these, information on the relevant elasticities of demand and supply is necessary.

With the foregoing by way of background, the elasticity estimates themselves will now be considered. Since it would be fairly time-consuming to trace through the various elasticities in detail by means of the indexes and the annotations, an attempt has been made to synthesise some of the major results.