Explaining the Recent Performance of Australia’s Manufactured Exports

Gordon Menzies and Geoffrey Heenan
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Geoffrey Heenan: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: Australia’s manufactured exports have grown rapidly since the mid-1980s. The growth of Australia’s trading partners and the overall depreciation of the exchange rate, while important, do not fully explain this growth. This paper seeks to explain the remaining growth in reference to firms’ cost structures, in particular their sunk cost structures. A model is developed. It shows how, in the presence of sunk costs, a shock to the economy can cause a permanent increase in the level of exports. This model is applied to Australia’s manufactured exports. The results suggest that their recent growth may not be undone, even if the recent economic shocks faced by exporters are reversed.

Date: 1993-08
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp9310

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