Exchange rate nonlinearities in EMU exports to the US

Florian Verheyen

Economic Modelling, 2013, vol. 32, issue C, 66-76

Abstract: This paper investigates the determinants of bilateral exports to the US for twelve EMU countries. Although export demand functions have been studied for at least seventy years of time, the issue of nonlinearity in export demand equations has been benignantly neglected in time series econometrics so far. Accordingly, this paper fills this gap and figures out if exports react to exchange rate changes in a nonlinear fashion. To tackle this issue, we apply the newly developed nonlinear ARDL bounds testing approach of Shin et al. (2011) and find that disregarding nonlinearities might be too restrictive. Our evidence points to the fact that exports react differently to appreciations and depreciations. More precisely, it seems as if exports respond stronger to depreciations than to appreciations. Evidence in favor of hysteresis is less robust.

Keywords: Export demand; EMU; US; Cointegration; Nonlinearity (search for similar items in EconPapers)
JEL-codes: C22 F14 F49 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:32:y:2013:i:c:p:66-76

DOI: 10.1016/j.econmod.2013.01.039

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