Do export price elasticities support tensions in currency markets? Evidence from China and six OECD countries
The empirical literature on trade imbalances does not make currency tensions easy to understand, because tensions across traders originate from the assumption that export-price elasticity is high. This paper provides new evidence by analysing the export-behaviour of China, France, Germany, Italy, Japan, UK, and the USA from 1990 to 2012. Estimates of export-price elasticities have been made using panel data techniques for non-stationary data. Long run relationships are stable to any structural break and indicate that exports are heavily dependent on world income, with long run income elasticity significantly higher than unity in many cases (China, Japan, Germany, UK and USA). Conversely, exports are price inelastic for most of the countries in the sample, in both the long and short runs. The exception is France, whose exports in the long run would increase by 2 percent if the country experienced a 1 percent depreciation of its real exchange rate.
|Date of creation:||18 Jun 2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Natalya Ketenci & Idil Uz, 2011. "Bilateral and regional trade elasticities of the EU," Empirical Economics, Springer, vol. 40(3), pages 839-854, May.
- Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
- THORBECKE, Willem, 2012. "The Short- and Long-Run Effects of Exchange Rate Changes on the Japanese Electronics Industry," Discussion papers 12019, Research Institute of Economy, Trade and Industry (RIETI).
- L. Grigorâ²ev & M. Salikhov, 2009. "Financial Crisis 2008," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 51(10), pages 35-62, February.
- Caporale, Guglielmo Maria & Chui, Michael K F, 1999. "Estimating Income and Price Elasticities of Trade in a Cointegration Framework," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 254-64, May.
- Megumi Kubota, . "Real Exchange Rate Misalignments: Theoretical Modelling and Empirical Evidence," Discussion Papers 09/24, Department of Economics, University of York.
- Gregory, Allan W. & Hansen, Bruce E., 1996.
"Residual-based tests for cointegration in models with regime shifts,"
Journal of Econometrics,
Elsevier, vol. 70(1), pages 99-126, January.
- Tom Doan, . "GREGORYHANSEN: RATS procedure to implement Gregory-Hansen test for Cointegration with breaks," Statistical Software Components RTS00082, Boston College Department of Economics.
- Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
- Tom Doan, . "RATS programs to replicate results from Gregory and Hansen(1996) JOE article," Statistical Software Components RTZ00081, Boston College Department of Economics.
- Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
- Jarkko Turunen & Richard T. Harmsen & Tamim Bayoumi, 2011. "Euro Area Export Performance and Competitiveness," IMF Working Papers 11/140, International Monetary Fund.
- Bernardina Algieri, 2011. "Modelling export equations using an unobserved component model: the case of the Euro Area and its competitors," Empirical Economics, Springer, vol. 41(3), pages 593-637, December.
- Jochen Kluve & Lena Jacobi, 2006.
"Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany,"
RWI Discussion Papers
0041, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
- Jacobi, Lena & Kluve, Jochen, 2006. "Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany," IZA Discussion Papers 2100, Institute for the Study of Labor (IZA).
- Martine Durand & Christophe Madaschi & Flavia Terribile, 1998. "Trends in OECD Countries' International Competitiveness: The Influence of Emerging Market Economies," OECD Economics Department Working Papers 195, OECD Publishing.
- 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.
- Zhizhong Yao & Feng Tian & Qingyi Su, 2013. "Income and Price Elasticities of China's Exports," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 21(1), pages 91-106, 01.
- Shigeyuki Hamori & Yoichi Matsubayashi, 2009.
"Empirical analysis of export demand behavior of LDCs: Panel cointegration approach,"
AccessEcon, vol. 29(3), pages 1990-1999.
- Shigeyuki, Hamori & Yoichi, Matsubayashi, 2009. "Empirical Analysis of Export Demand Behavior of LDCs: Panel Cointegration Approach," MPRA Paper 17316, University Library of Munich, Germany.
- Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
- Sawyer, W. Charles & Sprinkle, Richard L., 1997. "The Demand for Imports and Exports in Japan: A Survey," Journal of the Japanese and International Economies, Elsevier, vol. 11(2), pages 247-259, June.
- Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002.
"Unit root tests in panel data: asymptotic and finite-sample properties,"
Journal of Econometrics,
Elsevier, vol. 108(1), pages 1-24, May.
- Tom Doan, . "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
- Thorbecke, Willem, 2011. "Investigating the effect of exchange rate changes on china's processed exports," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 33-46, June.
- Kerr, William A. & Hobbs, Anna L., 2001. "Taming the Dragon: The WTO After the Accession of China," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 2(1).
- Fengbao Yin & Shigeyuki Hamori, 2011. "Estimating the import demand function in the autoregressive distributed lag framework: The case of China," Economics Bulletin, AccessEcon, vol. 31(2), pages 1576-1591.
- Michael A. S. Joyce & Ana Lasaosa & Ibrahim Stevens & Matthew Tong, 2011. "The Financial Market Impact of Quantitative Easing in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 113-161, September.
- Kravis, Irving B. & Lipsey, Robert E., 1978.
"Price behavior in the light of balance of payments theories,"
Journal of International Economics,
Elsevier, vol. 8(2), pages 193-246, May.
- Irving B. Kravis & Robert E. Lipsey, 1977. "Price Behavior in the Light of Balance of Payments Theories," NBER Working Papers 0181, National Bureau of Economic Research, Inc.
- Leland Crane & Meredith Crowley & Saad Quayyum, 2007. "Understanding the evolution of trade deficits: trade elasticities of industrialized countries," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 2-17.
- Abdelhak S. Senhadji & Claudio E. Montenegro, 1999. "Time Series Analysis of Export Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 2.
- Westerlund, Joakim, 2005.
"Testing for Error Correction in Panel Data,"
2005:11, Lund University, Department of Economics.
- Ruo Chen & Gian-Maria Milesi-Ferretti & Thierry Tressel, 2012. "External Imbalances in the Euro Area," IMF Working Papers 12/236, International Monetary Fund.
- THORBECKE, Willem & KATO Atsuyuki, 2012. "The Effect of Exchange Rate Changes on Germany's Exports," Discussion papers 12081, Research Institute of Economy, Trade and Industry (RIETI).
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:56727. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.