Export and import composition as determinants of bilateral trade in goods: evidence from Russia

E.D. Tovar-García, C.A. Carrasco

Research output: Contribution to journalArticle

Abstract

Conventional theory and several empirical studies state that incomes and exchange rates are the key determinants of the trade balance. Here, we argue that export and import composition are also key explanatory variables because some goods are inelastic and/or with a high added value, directly and indirectly affecting income and price elasticities and trade balance. Thus, if exports and/or imports significantly consist of price inelastic products, then, a positive and a negative effect, respectively, should be expected on the trade balance. Using bilateral trade data and dynamic panel models, we found that the ratio of exports of crude petroleum and natural gas (price inelastic goods) to total exports is significantly and positively associated with the Russian trade balance in goods. For its part, Russian imports of high-tech goods (income elastic and price inelastic with a high added value) show a negative association. The goods balance of Russia also responded to changes in relative income, but there is only weak evidence of reactions to changes in the exchange rate. These findings partially explain the persistent surplus in the Russian trade balance and current account.
Original languageEnglish
JournalPost-Communist Economies
DOIs
Publication statusPublished - 2019

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Trade balance
Russia
Import
Bilateral trade
Income
Exchange rates
Added value
Relative income
Natural gas
Petroleum
High-tech
Surplus
Current account
Dynamic panel model
Price and income elasticities
Empirical study

Cite this

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