Export Supply Functions Research Articles

The Demand Function for Industrial Exports: A Cross-Country Analysis

A country's exports are conventionally explained by its export prices relative to competitors' prices and by importing countries' real income. Except for its export prices, the demand for its exports is determined by factors beyond its control. It is thus usually assumed that the country passively responds to the multiplier effect that export demand generates in its domestic economy. This view is common both in macroeconomic theories of short-run income determination and long-run growth of an open economy. However, competition is imperfect in international trade. Apart from barriers set up artificially by importing countries, there are non-price factors in product quality, marketing, and services that make competition imperfect in international markets. Just as sellers can influence their demand curves in domestic markets by advertising, exporters can affect foreign demand through non-price competitive activities, e.g., export promotion. Moreover, imperfect availability of information gives a strong edge to well-established trading connections, which should become firmer as the exporting country expands in scale. In a dynamic world, process and product innovations are continually introduced; old goods are improved in quality and new goods come into existence. A country that leads others in initiating these innovations enjoys a dynamic comparative advantage. Thus, we can make a strong case that non-price competitiveness is significantly associated with an exporting country's growth performances. This argument suggests that domestic growth is an important determinant of the growth potential of a country's industrial exports. A fast-growing country could increase its exports more rapidly than a slow-growing country. While the former enjoys trade surpluses, the latter suffers from trade deficits. The balance of trade could be divergent rather than convergent in the process of growth. The experiences of industrial countries in the two decades preceding 1971 seem to be consistent with this interpretation. We wish to test our hypothesis and to evaluate how far it can account for differences in individual countries' export performances. This article presents such an empirical test by examining export records of major industrial countries over the 1955-1970 period through estimating a cross-country export demand function. Our investigation indicates that domestic factors were a particularly important determinant of export demand. We emphasize that the omission of these factors from the export demand function can make trade projections err and, consequently, lead to wrong policy prescriptions. We introduce export demand and supply functions in section II, examine data and variables in section III, present cross-country estimates of the export demand function in section IV, account for intercountry variations in the conventionally estimated world-income elasticity of export demand in section V, discuss a few econometric problems in section VI, and give concluding remarks in section VII.

Effects of Major Currency Realignment of Philippine Merchandise Trade

THE quantitative analysis of some economic effects of changes in exchange rates of the world's key currencies has been the subject of a few recent empirical studies,1 inspired presumably by the greater flexibility in currency exchange rates among developed countries that was initiated in the early part of this decade. Relatively large-scale equation systems are employed that take into account the simultaneous interaction among prices, incomes and spending in the economy usually divided into a number of developed countries and a Crest of the world category, the latter subsuming the less developed countries (LDCs). In the context of a small LDC, however, the complexity of the problem is somewhat reduced by the exogeneity of export and import prices (expressed in foreign currency) and the market concentration of LDC foreign trade typically in only a few developed countries. The Philippines is a case in point, about three-fourths of its trade flows throughout most of the post-war period being accounted for by Japan and the United States; moreover, certain principal trade commodities are dependent to a significant degree on only one or two dominant markets. Currency realignments involving these two countries, as exemplified by the 1971 Smithsonian Agreement, represent, therefore, a new form of external economic disturbance which may have significant repercussions on the country's balance of payments, output growth, income distribution and other policy objective variables. In this paper we attempt an evaluation of the direct effects on Philippine merchandise trade of the 1971 realignment of major currencies and the Central Bank decision to keep the exchange rate of the domestic currency (peso) fixed with respect to the U.S. dollar. First, a simplified framework of analysis is presented that identifies the parameters to be estimated for a quantitative assessment of the trade effects. We then estimate export supply and import demand functions for various trade commodities using annual data in the postwar period. The price coefficient estimates, together with the geographic distribution of Philippine trade flows in 1970, provide the empirical basis for examining the quantitative effects on Philippine merchandise trade of the altered sets of peso export and import prices attributable to the 1971 exchange rate changes.

Effective Devaluation and Exports: Some Issues in Empirical Analysis, with Illustrations from Israel

The arguments for and against devaluation are usually based on speculation from theory or intuition, but rarely on statistical evaluations of past devaluations. The relatively frequent devaluations in many developing countries2 stress the need and provide some data for such statistical analysis. But even where data exist for at least relatively simple regression analysis, conceptual issues concerning both dependent and independent variables complicate empirical work and conftise policy discussions. This paper discusses several such issues which arose in an empirical study of Israel, and the solutions adopted. Section I considers what is the most suitable dependent variable. Sections II and III discuss explanatory variables-exchange rates and a growth factor, respectively. Conspicuous by its absence is a foreign demand variable: several attempts to introduce such a variable did not lead to significant results, mainly because of high serial correlation between foreign demand indicators and domestic growth indicators. It may also be argued that Israel's aggregated industrial exports-to which the empirical work refers-generally faced highly (if not infinitely) elastic demand curves. Thus, our main concern is with export supply functions. Some empirical results are presented in Section IV.

NEW ZEALAND'S EXPORT SUPPLY FUNCTION

Economic RecordVolume 27, Issue 1-2 p. 21-29 NEW ZEALAND'S EXPORT SUPPLY FUNCTION A. R. BERGSTROM., A. R. BERGSTROM. Auckland University College.Search for more papers by this author A. R. BERGSTROM., A. R. BERGSTROM. Auckland University College.Search for more papers by this author First published: June 1951 https://doi.org/10.1111/j.1475-4932.1951.tb02834.xCitations: 2Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Citing Literature Volume27, Issue1-2June 1951Pages 21-29 RelatedInformation