Price Competition and the Fallacy of Composition in Developing Country Exports of Manufactures: Estimates of Short-Run Growth Effects

Arslan Razmi () and Robert Blecker
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Arslan Razmi: University of Massachusetts Amherst

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: This paper studies whether intra-developing country price competition has significant effects on the short-run growth rates of developing countries that are specialized in manufactured exports. Regression estimates using the generalized method of moments (GMM) applied to annual panel data for 17 developing countries in 1983-2004 show that these countries exhibit a “fallacy of composition,” in the sense that a real depreciation relative to competing developing country exporters increases the home country’s growth rate in the short run. The results also suggest that real depreciations for these developing countries relative to the industrialized countries are contractionary. JEL Categories: F43, O19, O14, F14

Keywords: Export-led growth; fallacy of composition; terms of trade; manufactured exports; contractionary devaluations; competitive devaluations. (search for similar items in EconPapers)
Date: 2005-11, Revised 2006-09
New Economics Papers: this item is included in nep-int
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