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Relative Responsiveness Of Trade Flows To A Change In Prices And Exchange Rate In Developing Countries

Author

Listed:
  • Mohsen Bahmani-Oskooee

    () (Center for Research on International Economics and Department of Economics, The University of Wisconsin-Milwaukee)

  • Orhan Kara

    (Department of Economics and Finance, West Chester University)

Abstract

In 1950 Orcutt conjectured that a country¡¯s trade flows could respond to a change in exchange rate quicker than they do to a change in relative prices. Previous research that supported Orcutt¡¯s hypothesis employed non-stationary data rendering the results to suffer from spurious regression problem. When we account for stationarity of the data by using cointegration and error-correction modeling, no strong evidence is found in support of the Orcutt¡¯s hypothesis. The findings in this paper for developing countries are similar to those found for developed countries.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Orhan Kara, 2008. "Relative Responsiveness Of Trade Flows To A Change In Prices And Exchange Rate In Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 33(1), pages 147-163, June.
  • Handle: RePEc:jed:journl:v:33:y:2008:i:1:p:147-163
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    Cited by:

    1. Fedoseeva, Svetlana & Zeidan, Rodrigo, 2016. "A dead-end tunnel or the light at the end of it: The role of BRICs in European exports," Economic Modelling, Elsevier, vol. 59(C), pages 237-248.

    More about this item

    Keywords

    Trade Flows; Relative Prices; Exchange Rate; Bounds Testing;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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