DO EXPORT PRICE ELASTICITIES SUPPORT TENSIONS IN CURRENCY MARKETS? EVIDENCE FROM CHINA AND SIX OECD COUNTRIES

Francesco Aiello (), Graziella Bonanno and Alessia Via

No 201405, Working Papers from Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF

Abstract: The empirical literature on trade imbalances does not make currency tensions easy to understand, because tensions across traders originate from the assumption that export-price elasticity is high. This paper provides new evidence by analysing the export-behaviour of China, France, Germany, Italy, Japan, UK, and the USA from 1990 to 2012. Estimates of export-price elasticities have been made using panel data techniques for non-stationary data. Long run relationships are stable to any structural break and indicate that exports are heavily dependent on world income, with long run income elasticity significantly higher than unity in many cases (China, Japan, Germany, UK and USA). Conversely, exports are price inelastic for most of the countries in the sample, in both the long and short runs. The exception is France, whose exports in the long run would increase by 2 percent if the country experienced a 1 percent depreciation of its real exchange rate

Keywords: export elasticity; competitive Devaluation; currency wars; panel data (search for similar items in EconPapers)
JEL-codes: C23 F10 F17 F37 P33 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014-06
New Economics Papers: this item is included in nep-cna and nep-int
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http://www.ecostat.unical.it/RePEc/WorkingPapers/WP05_2014.pdf First version, 2014-06 (application/pdf)

Related works:
Working Paper: Do export price elasticities support tensions in currency markets? Evidence from China and six OECD countries (2014)
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