Price and Income Elasticities of International Trade: Case of Jordan

Abstract

The aim of this study is to investigate empirically the economic determinations of Jordan's external trade, through estimating the price and income elasticities of international trade. To do so, the demand functions for both exports and imports will be specified and estimated using time series data of Jordanian economy for the periods 1980-2012. In this study, we show that, the sum of price elasticities of import and export demand exceeds one for Jordan which satisfied the Marshall-Lerner condition. The results of trade elasticity indicate that devaluation is an appropriate policy for Jordan to promote export revenues and improve trade balance. Keywords: income elasticity of exports, income elasticity of imports, price elasticity of exports, price elasticity of imports, international trade