Exports and real exchange rates in a small open economy

Alvaro Brunini (), Gabriela Mordecki and Lucí­a Ramí­rez ()
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Alvaro Brunini: Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a
Lucí­a Ramí­rez: Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a
Authors registered in the RePEc Author Service: Lucía Ramírez

No 13-15, Documentos de Trabajo (working papers) from Instituto de Economía - IECON

Abstract: This paper analyzes the relationship between exports and real exchange rate (RER) of six Uruguayan export products: beef, leather, dairy, chemical, metallurgical and plastics, selected for their importance in total exports during 1993-2011. We considered the sectoral RER and used the Johansen cointegration methodology to adjust the models. No evidence was found of a long-term relationship between sectoral exports and its sectoral RER. However, we found a long-term relationship between beef exports and cattle slaughter, which shows the high supply dependence of these exports, with an elasticity of 2.7. We also found a long-term relationship between dairy exports and the international price of skim milk, with a price-elasticity close to one. For metallurgical industry exports, the results show a long-term relationship with Argentinean GDP - main destination of those sales - with an income-elasticity of 1.7. In the case of the chemical industry, we found and elasticity near to one in relation to chemical imports, due to the fact that Uruguay must import the raw material for this industry. Finally, for plastic exports we found a cointegration vector with plastic imports and the sectoral RER, showing the importance of relative prices between exports and imports, and not only for exports.

Keywords: exports; sectoral real exchange rate; cointegration (search for similar items in EconPapers)
JEL-codes: C22 F31 F41 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2013-12
New Economics Papers: this item is included in nep-int and nep-opm
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https://hdl.handle.net/20.500.12008/4230

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Persistent link: https://EconPapers.repec.org/RePEc:ulr:wpaper:dt-15-13

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