April 1986

Can Debtor Countries Service Their Debts? Income and Price Elasticities for Exports of Developing Countries

Jaime Marquez and Caryl McNeilly


Interest in income and price elasticities for international trade has increased recently because of the debt crisis that many developing countries are experiencing. Estimates of income elasticities of import demand, however, range from a low of 1.3 to a high of 4.7. Such differences have important implications for debtor and creditor countries alike. Using quarterly data for the period 1973-1981, this paper estimates income and price elasticities for non-oil imports of five major industrial countries from non-OPEC developing countries. The empirical results suggest that the income elasticity is closer to 1 than to 4.

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Last Update: March 30, 2021