Abstract
Using annual data for Israel over the period 1960–1989 we estimate an econometric model for the supply and demand for exports. A novel feature is that domestic absorption crowds-out export supply. Exports are imperfect substitutes in world markets for tradeables produced abroad – the price elasticity of demand is about – 1.3 while the price elasticity of supply is about 1.5. The model is simulated to calculate the effects of policy instruments and other exogenous variables on exports and export prices.
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