engleski

TRADE ELASTICITIES IN THE EU: THE ROLE OF GLOBAL VALUE CHAINS

The aim of this paper is to contribute to the ongoing debate on the potential role of participation in global value chains (GVCs) in explaining international trade elasticities. Specifically, we focus on backward GVC participation. We start by estimating the traditional import and export income and price elasticities, using different panel data models and pooled mean group estimator for dynamic heterogeneous panels, on a sample of 28 EU countries during the 2000- 2018 period. Next, we divide our sample into two groups of countries, by taking into account their average backward participation in global value chains and repeat the procedure. We extend the traditional import and export demand functions by adding indicators of backward GVC participation and estimate five year rolling window import and export income and price elasticities. Additionally, due to pronounced endogeneity issues in empirical import demand analysis, we consider the use of an alternative import income demand indicator. This procedure allows us to explore i) if and how backward participation in global value chains affects the estimated import and export elasticities, ii) whether the inclusion of backward GVC participation indicators reduces the magnitude and volatility of the estimated parameters over time and iii) if different income specification affects the estimated import demand elasticities. Finally, we estimate exchange-rate pass-through and combine import and export price exchange rate elasticities with trade (import and export volume) exchange rate elasticities to test if the Marshall-Lerner condition holds in EU countries depending on their backward GVC participation. Our findings suggest that i) the estimated import and export elasticities differ significantly between the two groups of countries (above vs below-average backward GVC participation) ii) the inclusion of backward GVC participation indicators does not significantly reduce the magnitude and volatility of the estimated parameters over time and iii) that different income specification reduces the magnitude and volatility of the estimated import demand elasticities. The key implication of our findings is that the Marshall-Lerner condition is more likely to hold in countries characterized with above average backward GVC participation.

Import elasticities ; export elasticities ; global value chains ; Marshall-Lerner condition

nije evidentirano