City Research Online

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 Type:	Article
Additional Information:	© 2025 The Author(s). International Journal of Finance & Economics published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords:	income elasticity of demand for imports and exports, international trade, price elasticity of demand for imports and exports, real effective exchange rate
Subjects:	H Social Sciences > HG Finance
Departments:	School of Policy & Global Affairs School of Policy & Global Affairs > Department of Economics
SWORD Depositor:	Symplectic Administrator

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