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Traditional Export Demand Relation: A Cointegration and Parameter Constancy Analysis

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  • Jamal HUSEIN

    ()

Abstract

This study empirically estimates the critical parameters of the aggregate export demand function for Jordan by using annual time series data (1970-2004) and by applying both Johansen-Juselius and Saikkonen-Lütkepohl multivariate cointegration procedures. The empirical results confirm that there exists a unique and significant long-run equilibrium relationship among exports, foreign income, relative export price, and domestic output. Our estimation results show that income elasticity is much larger than unity while export price elasticity is slightly above one. The long-run estimate of the export price elasticity reveal that the Marshall-Lerner condition is satisfied for Jordan and currency devaluation may be effective in improving Jordanian exports and her trade balance. Moreover, domestic output has a positive and significant impact on Jordanian exports. Finally, tests for the parameter constancy suggested by Hansen and Johansen (1999) reveal that the hypothesis of stable long-run elasticities could not be rejected.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .

Volume (Year): 5 (2008)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:eaa:ijaeqs:v:5:y2008:i:2_4

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Related research

Keywords: Export demand; Elasticity; Cointegration; Stability analysis;

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References

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  1. Ploberger, Werner & Kramer, Walter & Kontrus, Karl, 1989. "A new test for structural stability in the linear regression model," Journal of Econometrics, Elsevier, vol. 40(2), pages 307-318, February.
  2. Perron, P., 1986. "Trends and Random Walks in Macroeconomic Time Series: Further Evidence From a New Approach," Cahiers de recherche 8650, Universite de Montreal, Departement de sciences economiques.
  3. James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
  4. Saikkonen, Pentti & Lutkepohl, Helmut, 2000. "Testing for the Cointegrating Rank of a VAR Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 451-64, October.
  5. Trenkler, Carsten, 2004. "Determining p-values for Systems Cointegration Tests With a Prior Adjustment for Deterministic Terms," Papers 2004,37, Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE).
  6. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  7. Warne, Anders & Bruggeman, Annick & Donati, Paola, 2003. "Is the demand for euro area M3 stable?," Working Paper Series 0255, European Central Bank.
  8. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  9. Guisan, M.Carmen & Cancelo, M.Teresa, 2002. "Econometric Models of Foreign Trade in OECD Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 2(2), pages 65-81.
  10. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  11. Saikkonen, Pentti & Lütkepohl, Helmut, 1998. "Testing for the cointegrating rank of a VAR process with an intercept," SFB 373 Discussion Papers 1998,51, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  12. Bahmani-Oskooee, Mohsen & Niroomand, Farhang, 1998. "Long-run price elasticities and the Marshall-Lerner condition revisited," Economics Letters, Elsevier, vol. 61(1), pages 101-109, October.
  13. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
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Cited by:
  1. IBRAHIM, Mohamed Abbas, 2012. "Merchandise Export Demand Function For Egypt: A Panel Data Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(1).
  2. Husein, J, 2010. "Export-Led Growth Hypothesis In The Mena Region: A Multivariate Cointegration, Causality And Stability Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).

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