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Explaining the Recent Performance of Australia’s Manufactured Exports

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  • Gordon Menzies

    (Reserve Bank of Australia)

  • Geoffrey Heenan

    (Reserve Bank of Australia)

Abstract

Australia’s manufactured exports have grown rapidly since the mid-1980s. The growth of Australia’s trading partners and the overall depreciation of the exchange rate, while important, do not fully explain this growth. This paper seeks to explain the remaining growth in reference to firms’ cost structures, in particular their sunk cost structures. A model is developed. It shows how, in the presence of sunk costs, a shock to the economy can cause a permanent increase in the level of exports. This model is applied to Australia’s manufactured exports. The results suggest that their recent growth may not be undone, even if the recent economic shocks faced by exporters are reversed.

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Bibliographic Info

Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9310.

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Date of creation: Aug 1993
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Handle: RePEc:rba:rbardp:rdp9310

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  1. Richard Baldwin, 1988. "Hysteresis In Import Prices: The Beachhead Effect," NBER Working Papers 2545, National Bureau of Economic Research, Inc.
  2. John Pitchford, 1993. "The Exchange Rate and Macroeconomic Policy in Australia," RBA Annual Conference Volume, in: Adrian Blundell-Wignall (ed.), The Exchange Rate, International Trade and the Balance of Payments Reserve Bank of Australia.
  3. Richard Baldwin & Paul R. Krugman, 1986. "Persistent Trade Effects of Large Exchage Rate Shocks," NBER Working Papers 2017, National Bureau of Economic Research, Inc.
  4. Goldstein, Morris & Khan, Mohsin S, 1978. "The Supply and Demand for Exports: A Simultaneous Approach," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 275-86, May.
  5. Matthew T. Jones & Jenny Wilkinson, 1990. "Real Exchange Rates and Australian Export Competitiveness," RBA Research Discussion Papers rdp9005, Reserve Bank of Australia.
  6. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
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Cited by:
  1. Pope, Robin, 1999. "Local Manufacturing Hurt by Depreciations in a Theoretical Model Reflecting the Australian Experience," Discussion Paper Serie B 450, University of Bonn, Germany.
  2. Gordon Menzies, 1994. "Explaining the Timing of Australia's Manufactured Export Boom," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(4), pages 72-86.
  3. Nicholas de Roos & Bill Russell, 2000. "The Exports Transmission Mechanism of Foreign Business Cycles to Australia," Dundee Discussion Papers in Economics 110, Economic Studies, University of Dundee.
  4. Peter Drysdale & Weiguo Lu, 1996. "Australia's Export Performance in East Asia," Asia Pacific Economic Papers 259, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  5. Nicolas de Roos & Bill Russell, 1996. "Towards an Understanding of Australia’s Co-movement with Foreign Business Cycles," RBA Research Discussion Papers rdp9607, Reserve Bank of Australia.
  6. Craig Beaumont & Li Cui, 2007. "Conquering Fear of Floating," IMF Policy Discussion Papers 07/2, International Monetary Fund.
  7. Andrew Marks & Mehdi Sadeghi, 1998. "Testing the Olson Hypothesis within the Australian Context," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 31(2), pages 130-144.
  8. Michele Bullock & Stephen Grenville & Geoffrey Heenan, 1993. "The Exchange Rate and the Current Account," RBA Annual Conference Volume, in: Adrian Blundell-Wignall (ed.), The Exchange Rate, International Trade and the Balance of Payments Reserve Bank of Australia.

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