An Elasticity Approach to Forecast Dyadic Trade and Economic Interdependence
CACI INC-FEDERAL ARLINGTON VA
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Economic interdependence is defined as the relative proportion of a countrys total trade with another country. To forecast economic interdependence in the 1985-1994 period, forecasts of dyadic trade must first be made. An elasticity approach is used to generate these forecasts. The income elasticity of imports for a particular country is defined as the ratio of the percent change in its imports divided by the percent change in its GNP. Import elasticities are important concepts of international economics and their use in forecasting economic interdependence is particularly useful since elasticities can yield future dyadic trade.
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