Influence of demand and supply factors on trade flows: Evidence for Argentina (1996–2016)

Abstract

Using an ARDL‐ECM model, we estimate the aggregate and sectoral elasticities for Argentina. We confirm that the income elasticities of exports are lower than those of imports. When we control by real labor costs, exchange rate volatility, the black‐market exchange rate and domestic absorption, the difference between income elasticities is reduced but remains statistically significant. In the sectoral breakdown, the higher the technological intensity in the industry, the higher the income elasticities. Agro‐based, textile, automotive, process, and engineering products have price elasticities two or three times the magnitude of aggregate elasticity.