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G7 Current Account ImbalancesSustainability and Adjustment$
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Richard H. Clarida

Print publication date: 2007

Print ISBN-13: 9780226107264

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226107288.001.0001

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Understanding the U.S. Trade Deficit

Understanding the U.S. Trade Deficit

A Disaggregated Perspective

(p.247) 7 Understanding the U.S. Trade Deficit
G7 Current Account Imbalances

Catherine L. Mann

Katharina Plück

University of Chicago Press

This chapter reports new estimates for the elasticity of U.S. trade flows using bilateral, commodity-detailed trade data for thirty-one countries, using measures of expenditure and trade prices matched to commodity groups and including a commodity-and-country specific proxy for global supply-cum-variety. It is found that industrial and developing countries have different demand and relative price elasticities for the four commodity categories. Also, it illustrates that variety is a significant variable for the behavior of capital goods trade. Matched expenditure, matched prices, and variety play a key role in decreasing the asymmetry of estimated elasticities of trade with respect to economic activity. Short-run estimates of U.S. consumer goods imports with respect to matched economic activity exhibit very high cyclical elasticity. There are differences in demand elasticities for consumer goods and for other product categories.

Keywords:   elasticity, U.S. trade flows, expenditure, trade prices, commodity, capital goods, consumer goods

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