Exports and Imports, is there simultaneity? A structural model for supertrading economies

Abstract

The determining of exports and imports independently, which is a common assumption in literature, may be over restrictive for extremely open economies. As an alternative, this study proposes and estimates structural models for the simultaneous determination of trade flows in three extremely open economies (Ireland, Belgium and Singapore). It confirms the existence of an interrelation between exports and imports and, as a result, the existence of a bias in the estimates of trade elasticities when the interrelation is not taken into account.