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Exchange rate nonlinearities in EMU exports to the US

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  • Verheyen, Florian

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.

Suggested Citation

  • Verheyen, Florian, 2013. "Exchange rate nonlinearities in EMU exports to the US," Economic Modelling, Elsevier, vol. 32(C), pages 66-76.
    • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:66-76
    DOI: 10.1016/j.econmod.2013.01.039
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    References listed on IDEAS

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    More about this item

    Keywords

    Export demand; EMU; US; Cointegration; Nonlinearity;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other

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