Long-run price and income elasticities of demand for Hong Kong exports: a structural cointegrating VAR approach

A. J. Abbott and G. De Vita

Applied Economics, 2002, vol. 34, issue 8, 1025-1032

Abstract: This article revisits a system of export volume and price equations to estimate the long-run price and income effects in the demand for Hong Kong's exports. Using a recently developed restricted cointegrating VAR approach it tests theorybased restrictions and obtains estimates of the long-run structural coefficients. The estimation results provide supporting evidence for the theory-based restrictions and suggest that the demand for Hong Kong's exports is both price and income elastic. This article is therefore able to present a long-run model of Hong Kong's exports that is both theory and data consistent, and long-run elasticities that are economically interpretable. The short-run properties of the model are illustrated by means of persistence profiles, which confirm the cointegrating vectors tendency of convergence.

Date: 2002
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DOI: 10.1080/00036840110514

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