Price Elasticity Of Export Demand Research Articles

Rethinking the balance-of-payments-constrained approach, in the light of the recent commodity boom

We develop a balance-of-payments-constrained growth (BPCG) model to explain the specific conditions of small commodity-dependent countries. Based on Thirlwall’s model and subsequent contributions, we elaborate a new model that assumes exogenous export prices, infinite price elasticity of export demand, and supply of commodities that react to prices with positive, but not infinite, elasticity. We contribute to explaining the central role of export prices and the relevance of price competitiveness in the growth dynamics. It is shown that a real devaluation and an improvement in terms of trade (TT) in a context of increasing international prices increase the equilibrium growth rate. However, export prices are more relevant than import prices in determining the growth of these countries, challenging the traditional interpretation of TT. Moreover, our model enriches the extensive literature which has corroborated that a development strategy based exclusively on increasing production capacity in commodity sectors is doomed to fail.

Demand for Malaysia's Exports: Evidence from the Electronics Industry

This study estimates the determinants of foreign demand for Malaysia's top five electronics exports by SITC (Standard International Trade Classification) product groups from 1990 to 2001. Cointegration results indicate a unique long-run relationship between export demand for electronic products and relative prices and foreign income. Both the estimated long-run income and price elasticities of export demand are greater than 1, conforming to a pattern found in most fast-growing economies and implying price is an important factor in explaining export growth with the exception of semiconductor exports. The present study has important policy implications to the competitiveness of electronics exports that can lead Malaysia's transition towards high-technology industrialization.

Simultaneous estimation of income and price elasticities of export demand, scale economies and total factor productivity growth for Brazil

This article focuses on a growth model in which (unlike other models) low (high) export demand elasticities and the fact that developing countries are importers of capital goods help explaining the slow (high) growth of these countries in the transition and in the steady state. The question arises whether export demand elasticities are low or high. For answering this question, export demand elasticities for the case of Brazil are obtained by estimation of the model. As a by-product of estimating the model, we obtain estimates for total-factor productivity growth and for scale economies. Based on the results from estimation we calculate steady-state growth rates, engine and handmaiden effects of growth as well as dynamic steady-state gains from trade. The model and the results are discussed in regard to several strands of literature.

Economic Impacts of the U. S. Soybean Aphid Infestation: A Multi-Regional Competitive Dynamic Analysis

We estimated the economic benefits resulting from controlling soybean aphid infestation by using a multi-regional competitive dynamic equilibrium model. Results indicate that the reduction of soybean production resulting from a soybean aphid infestation is largely absorbed by reducing soybean exports, due to the higher price elasticity of export demand compared to domestic demand. Producer benefits resulting from controlling soybean aphids would increase by between $949 million and $1.623 billion in ten years under various scenarios. Results also suggest that it is economically more efficient to control soybean aphids when the rate of intrinsic growth is relatively lower, the supply price elasticity of soybean acreage is relatively more elastic, and insecticide treatment costs per acre are lower. However, if the discovery of the gene Rag-1 (TF04048) leads to new cultivars that withstand the soybean aphid, our estimates will overestimate the actual damages. Even so, our analysis demonstrates that it is critical to control soybean aphids early in their infestation cycle to avoid a rapid increase in damages.

Macroeconomics of International Price Discrimination

This paper builds a baseline two-country model of real and monetary transmission under optimal international price discrimination. Distributing traded goods to consumers requires nontradables; because of distributive trade, the price elasticity of export demand depends on the exchange rate. Profit-maximizing monopolistic firms drive a wedge between wholesale and retail prices across countries. This entails possibly large deviations from the law of one price and incomplete pass-through on import prices. Yet, consistent with expenditure-switching effects, a nominal depreciation generally worsens the terms of trade. Moreover, the exchange rate and the terms of trade can be more volatile than fundamentals. For plausible ranges of the distribution margin, there can be multiple steady states, whereas large differences in nominal and real exchange rates across equilibria translate into small differences in consumption, employment and the price level. Finally, we show that with competitive goods markets international policy cooperation is redundant even under financial autarky.

A NOTE ON TRADE ELASTICITIES IN ASIAN COUNTRIES

This article estimates the price and income elasticities of import and export demands for India, Japan, the Philippines, Sri Lanka, and Thailand using annual time series data. Both price and income elasticities of import demand are found to be in the inelastic range for all five countries. Export demand is found to be price elastic for Japan, the Philippines, and Thailand and price inelastic for India and Sri Lanka. Export demand is found to be income elastic for Japan but not for the other four countries. The Marshall-Lerner-Robinson condition states that a devaluation improves the balance of trade position only if the sum of the absolute values of price elasticity of import demand and the price elasticity of export demand is greater than one. This condition is met for India, Japan, the Philippines, and Thailand but not for Sri Lanka.

DEMAND AND SUPPLY FACTORS IN THE EXPORT OF SOUTH AFRICAN FRESH ORANGES TO THE UNITED KINGDOM: 1976–1993 / VRAAG- EN AANBODFAKTORE IN DIE UITVOER VAN SUID-AFRIKAANSE VARSLEMOENE NA DIE VERENIGDE KONINKRYK: 1976–1993

Two Stage Least Squares and principal component analysis were used to estimate the export demand and supply of South African (SA) fresh oranges in the United Kingdom (UK) during 1976–1993. Export demand was negatively related to the SA fresh oranger price relative to the price of fresh oranges from Israel, and positively related to lagged orange exports (consumer brand loyalty proxy). Export supply was positively related to lagged net export realisation price relative to domestic orange price, the SA fresh orange price in the UK relative to the SA fresh orange price in France, lagged exports (export orientation), and supply shocks. The relative price elasticity of export demand was inelastic in both the short- and long-run, indicating that Capespan International and other future exporters may need to diversify fresh orange exports to alternative export markets to increase real revenue. Long-run export supply was inelastic with respect to relative price, implying that if SA fresh orange exports are included in a Free Trade Agreement with the EU, they are unlikely to have a marked adverse affect on EU fresh orange producers.

The determinants of Spanish industrial exports to the European Union

This paper investigates the determinants of trends in Spain's industrial exports to the other European Union countries by using a sectoral panel data approach. The results show that price elasticities of export demand differ widely among sectors. They also provide support to the idea that non-price factors have a significant influence on international competitiveness. In particular they show that technological and advertising effort have a significant effect not only on the evolution of exports but also on price elasticity.

Testing the small‐country assumption: Thailand's rice exports

The familiar ‘small‐country’ assumption is tested empirically in this paper, focusing upon the long‐run international demand for Thailand's rice exports and drawing upon recent developments in the statistical analysis of economic time series. A relatively robust long‐run price elasticity of export demand is obtained, at just under 2. The literature on the export demand for manufactured goods has shown the central importance of the ‘normalization’ used during estimation. Our results suggest that this issue may not be as important in the case of primary commodity exports, at least not where the exporting country possesses a degree of monopoly power.

The price elasticity of export demand for soybeans and soybean products reconsidered

Abstract This paper addresses the question of whether the export demand for soybeans and soybean products has structurally changed over the 1950 to 1992 period as the US agriculture sector has become more integrated with the rest of the world economy. The export demand equation specification considered is one that has been used extensively in the empirical literature. The results of a structural change test suggest that the export demand for soybeans, soybean meal, and soybean oil did not destabilize over the sample period. Moreover, based on the model specification and the data available for estimating the requisite parameters, it is possible to infer conclusively that the long‐run soybean and soybean product export price elasticities are in the elastic range. The implications are that, among other things, for each 1 % reduction in the price of soybeans, soybean meal, and/or soybean oil brought about through a government program (e.g., the Export Enhancement Program applicable to soybean oil), exports wi...

FACTORS AFFECTING THE DEMAND FOR AND SUPPLY OF SOUTH AFRICAN YELLOW MAIZE EXPORTS / Faktore wat die vraag na en aanbod van Suid-Afrikaanse geelmielie-uitvoer beïnvloed

Abstract A simultaneous-equation model containing yellow maize export demand and supply functions was specified and estimated by Two-Stage Least Squares using annual data for the period 1960–1990. Export demand was influenced by the world price (real) of yellow maize and lagged exports. Export supply was explained by the lagged domestic producer price, lagged exports and random shocks in supply. The price elasticity of export demand estimated directly from the model was high (-37.90), but lower than that estimated by Johnson's indirect method (-181.30). Export supply in the short- and long-run was price inelastic and relatively more responsive to supply shocks. These results support a priori expectations that local yellow maize producers are price takers on the world market and that export supply reacts sluggishly to changes in the lagged producer price of yellow maize. Climatic variation was the major determinant of export supply. Implications for future yellow maize export supply of potential world trad...

Estimation of Price Elasticities of Export Demand for Canadian and U.S. Wheat: A Nontraditional Approach

Estimation of Price Elasticities of Export Demand for Canadian and U.S. Wheat: A Nontraditional Approach

The Demand for LDC Exports of Manufactures: Estimates from Hong Kong: A Comment

In the March I 988 issue of this JOURNAL, Riedel claims that the findings of relatively low price elasticity of demand by 'the bulk of time series work' are based on the assumption of infinite price elasticity of export supply and that the demand parameters derived from a fully specified, simultaneous equation model strongly contradict the consensus view (on the basis of his results suggesting infinitely price elastic demand for exports of manufactures from Hong Kong). In this Comment, both of his claims and his results are disputed. The author's conclusion concerning infinite price elasticity of demand for exports can be objected to on at least three grounds: First, in the context of his formulation, it implies an abnormally large degree of 'money illusion' on the part of the importers of manufactures. Second, in using the inverse form of the demand function rather than the normal form he would necessarily produce a much larger estimate of price elasticity than otherwise. Using his approach, one can quite easily produce an estimate of the marginal propensity to consume in excess of unity or an implausibly large estimate of the marginal propensity to save. Third, infinite price elasticity is inferred from the statistical nonsignificance of the coefficient of export quantity in the inverse form of demand (which represents the inverse of price elasticity). However, it can be argued that the estimate of the coefficient of export quantity is not statistically significant because of the high intercorrelation (multicollinearity) between quantity and income. In view of the obvious upward bias involved in his approach to the estimation of price elasticity of export demand, it is not only possible but also most probable that the adoption of his approach will also yield very high estimates of price elasticities of demand generally. It is conceivable that one can produce a highly elastic demand for primary exports not only at individual country level but also at the world level, using his approach. If LDCs wrongly believe that demand for their primary exports is price elastic when in fact it is not, unwarranted expansion of production could cause a significant fall in their export earnings with grave consequence for their economic development. It is therefore most important to point out the weaknesses of his approach before it is widely adopted by other researchers keen to get high price elasticities of demand.

New Zealand's price elasticity of export demand revisited∗

New Zealand's price elasticity of export demand revisited∗

The price elasticity of export demand for US agricultural commodities reconsidered

In this paper, the question of whether the export demand for three agricultural commodities (corn, soybeans and wheat) in the United States has structurally changed over the 1971 to 1986 period is examined. The export demand specification considered in the analysis is one that has been used extensively in the empirical literature. The stability question is explored. The results suggest that both the export demand for corn and the export demand for soybeans destabilized over the sample period. When corrected for this instability, the estimated long run price elasticities do not allow for a definitive conclusion with regard to the question of whether the demand for exports of agricultural commodities is now elastic. This means that agricultural policy alternatives become obfuscated.

THE ELASTICITY OF DEMAND FOR THE EXPORTS OF A SINGLE COUNTRY — A RECONSIDERATION

One country's exports of a particular commodity are usually imperfect substitutes for similar exports from other countries. Consequently, the price elasticity of export demand involves unknown cross elasticities between sub‐groups of the commodity. However, there are constraints on the relative magnitudes of all the sub‐group elasticities. These make it possible to assess the degree to which the whole commodity elasticity divided by the market share is an over‐estimate of the export elasticity.