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Pablo Andres Neumeyer; Martín Gonzalez Rozada (2003)
Types: Preprint
This objective of this paper is to estimate the elasticity of substitution in the demand for non-tradable goods relative to tradable goods in Argentina. This parameter plays a crucial role in the analysis of the macroeconomic equilibrium of a small open economy (Mendoza, Galindo and Izquierdo (2003)). Using two data sets we found estimates for this elasticity of, approximately, 0.40 and 0.48.
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    • [1] Enrique Mendoza, Arturo Galindo and Alejandro Izquierdo (2003), Terms of Reference, IADB Research project, The Elasticity of Substitution in Demand for Non-tradable Goods in Latin America, manuscript, IADB, Washington, DC.
    • [2] Enrique Mendoza (1995) “The terms of trade, the real exchange rate, and economic fluctuations,” International Economic Review, Vol. 36, No. 1, pp. 101-137.
    • [3] Alan C. Stockman; Linda L. Tesar (1995), “Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements,” The American Economic Review, Vol. 85, No. 1., March, pp. 168-185.
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