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Abstract

We use foreign trade data on both imports and exports of goods and services among a group of 15 advanced economies to determine the incomes and price elasticities of demand for exports and imports of goods, services and goods and services combined in the long run. We find that changes in foreign and domestic income have, as expected, a positive long-run impact on the demand for exports and imports, respectively, with the impact of income changes being typically greater on the demand for services than on the demand for goods. We also confirm that a depreciation in the real effective exchange rate leads to an increase in exports for most of the economies, while the impact on the demand for imports is mixed. Finally, we find a large degree of heterogeneity in the income and price elasticities of demand for trade in goods and services among the 15 economies.

Publication Date

2025-10-30

Publication Title

International Journal of Finance and Economics

ISSN

1076-9307

Acceptance Date

2025-10-09

Deposit Date

2025-11-10

Funding

We are extremely grateful to the two anonymous referees for their extensive comments and suggestions on earlier versions of this paper. We are also very grateful to the participants of the research seminars at Fern Universität Hagen and Universidad de Guadalajara, the 2024 International Conference on Empirical Economics at PSU‐Altoona, the 2024 Northeast Business & Economics Association annual conference in Danbury, CT and the 2024 European Economics and Finance Society Annual Conference in Athens for useful comments and suggestions, particularly from Sushanta Mallick, Dimitrios Asteriou, Reginald Kadzutu, Michael Murach and Xiaopeng Yin. Tjeerd M. Boonman would like to thank the McMullen family and the LHBS Business Council for their support for this research.

Keywords

ncome elasticity of demand for imports and exports | international trade | price elasticity of demand for imports and exports | real effective exchange rate, real effective exchange rate, price elasticity of demand for imports and exports, income elasticity of demand for imports and exports, international trade

First Page

1

Last Page

15

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