01734cas a2200241 a 4500 AALejournalIMF006183 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451874242 1018-5941 BD-DhAAL BD-DhAAL International Monetary Fund. Elasticity Optimism. Washington, D.C. : International Monetary Fund, 2009. 1 online resource (45 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students In most macroeconomic models, the substitutability between domestic and foreign goods is calibrated using aggregated data. This imposes homogeneous elasticities across goods, and the calibration is only valid under this assumption. If elasticities are heterogeneous, the aggregate substitutability is a weighted average of good-specific elasticities, which in general cannot be inferred from aggregated data. We identify structurally the substitutability in US goods using multilateral trade data. We impose homogeneity, and find an aggregate elasticity similar in value to conventional macroeconomic estimates. It is more than twice larger with sectoral heterogeneity. We discuss the implications in various areas of international economics. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2009/279 Full text available on IMF http://elibrary.imf.org/view/journals/001/2009/279/001.2009.issue-279-en.xml IMF e-Library