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

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  • A. J. Abbott
  • G. De Vita

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.

Suggested Citation

  • A. J. Abbott & G. De Vita, 2002. "Long-run price and income elasticities of demand for Hong Kong exports: a structural cointegrating VAR approach," Applied Economics, Taylor & Francis Journals, vol. 34(8), pages 1025-1032.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:8:p:1025-1032
    DOI: 10.1080/00036840110514
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    References listed on IDEAS

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    1. Prema-chandra Athukorala, 1990. "How valid is the Small-Country Assumption?," Working Papers 1990.02 EDIRC Provider-In, School of Economics, La Trobe University.
    2. Stephen G. Hall & Jennifer V. Greenslade & S. G. Brian Henry, 1999. "On the Identification of Cointegrated Systems in Small Samples: Practical Procedures with an Application to UK Wages and Prices," Computing in Economics and Finance 1999 643, Society for Computational Economics.
    3. Anthony Garratt & Kevin Lee & Yongcheol Shin, 1999. "A long run structural macroeconometric model of the UK (first version)," Edinburgh School of Economics Discussion Paper Series 17, Edinburgh School of Economics, University of Edinburgh.
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    Cited by:

    1. B. Bhaskara Rao & Rup Singh, 2007. "Estimating export equations," Applied Economics Letters, Taylor & Francis Journals, vol. 14(11), pages 799-802.
    2. Koi Nyen Wong & Tuck Cheong Tang, 2009. "Exchange rate variability and the export demand for Malaysia's semiconductors: an empirical study," Applied Economics, Taylor & Francis Journals, vol. 43(6), pages 695-706.
    3. Maja Kadievska-Vojnovic & Danica Unevska, 2007. "Price and Income Elasticities of Export and Import and Economic Growth in the case of the Republic of Macedonia," Working Papers 2007-01, National Bank of the Republic of North Macedonia.
    4. Athukorala, Premachandra & Riedel, James, 1994. "Demand and Supply Factors in the Determination of NIE Exports: A Simultaneous Error-Correction Model for Hong Kong: A Comment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1411-1414, November.
    5. Rabia Latif & Attiya Yasmin Javid, 2016. "The Determinants of Pakistan Exports of Textile: An Integrated Demand and Supply Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(3), pages 191-210.
    6. Baak, SaangJoon, 2014. "Do Chinese and Korean products compete in the Japanese market? An investigation of machinery exports," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 256-271.
    7. Michael K. Salemi, 2007. "Long-run and Cyclic Movements in the Unemployment Rate in Hong Kong: A Dynamic, General Equilibrium Approach," Working Papers 192007, Hong Kong Institute for Monetary Research.

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