Keywords

trade modelling, income and price elasticities, panel data

This paper deals with the estimation of price and income elasticities of Croatian trade flows using disaggregated data by industries for the period after Croatia joined the WTO in 2000 and until 2007. Export and import demand functions are estimated for total merchandise trade as well as for se veral partner country subsamples, with controls for other poten tial trade flow determinants, such as the exchange rate, tariffs, FDI inflows and credit supply to particular industries. Given the dynamic nature of the studied flows and potential endogeneity issues, the models were estimated using the Arellano-Bond method (1991). The results indicate that the sensitivity of both exports and imports to prices is relatively low, while income effects are stronger. These results are confirmed in all the country subsamples. The influence of other factors, however, does not appear to be as stable or uniform across country subsamples.