Bootstrapping Demand and Supply Elasticities: The Indian Case

We discuss bootstrap confidence intervals for short-run and long-run demand and supply elasticities for imports and exports. We use Koshal, Shukla and Koirla’s (1992) simultaneous equation demand and supply model for Indian exports based on 1960-1986 data. Although the long run price elasticity of supply is large, (about 25) and significant, the asymptotic as well as bootstrap confidence intervals remain wide. Hence price reduction by devaluation of Indian Rupee alone may not have been enough to spur the major export growth experienced in the early 1990s. We discuss the potential uses of relatively simple bootstrap methods in the context of the delta method for standard errors of long run elasticities, pivoting transform, nonlinearities and nonnormality. (EL F14, C12, C15, C30)