IDEAS home Printed from https://ideas.repec.org/p/rba/rbardp/rdp2006-01.html
   My bibliography  Save this paper

Modelling Manufactured Exports: Evidence from Australian States

Author

Listed:
  • David Norman

    (Reserve Bank of Australia)

Abstract

This paper looks at the determinants of national manufactured exports through the use of a panel of Australian states. The panel approach is taken to assess whether the coefficient instability present in direct estimates of export elasticities can be alleviated by utilising the cross-state variation present in both manufactured exports and their determinants. Estimates of the price elasticity using this approach are found to be relatively robust to the use of the mean-group or fixed-effects panel estimation, and to a range of different export demand specifications. Income elasticity estimates are found to be stable across models, but sensitive to the inclusion of other variables. However, the degree of coefficient instability is not found to be significantly less in panel models than when using direct estimates, suggesting that direct estimation remains appropriate. The analysis is then extended to consider the role that domestic factors play in determining manufactured exports. In line with theory, it is found that domestic final demand and capacity utilisation are inversely related to manufactured exports.

Suggested Citation

  • David Norman, 2006. "Modelling Manufactured Exports: Evidence from Australian States," RBA Research Discussion Papers rdp2006-01, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp2006-01
    as

    Download full text from publisher

    File URL: https://www.rba.gov.au/publications/rdp/2006/pdf/rdp2006-01.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nikola Dvornak & Marion Kohler & Gordon Menzies, 2005. "Australia's Medium‐Run Exchange Rate: A Macroeconomic Balance Approach," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 101-112, June.
    2. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
    3. Mr. Yi Wu, 2005. "Growth, Expansion of Markets, and Income Elasticities in World Trade," IMF Working Papers 2005/011, International Monetary Fund.
    4. Nikola Dvornak & Marion Kohler, 2007. "Housing Wealth, Stock Market Wealth and Consumption: A Panel Analysis for Australia," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 117-130, June.
    5. Robyn Swift, 1998. "Exchange Rate Pass‐through: How Much do Exchange Rate Changes Affect the Prices of Australian Exports?," Australian Economic Papers, Wiley Blackwell, vol. 37(2), pages 169-184, June.
    6. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 43-61.
    7. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    8. Luci Ellis, 2001. "Measuring the Real Exchange Rate: Pitfalls and Practicalities," RBA Research Discussion Papers rdp2001-04, Reserve Bank of Australia.
    9. Alessandro Rebucci, 2000. "Estimating VARs with Long Heterogeneous Panels," Econometric Society World Congress 2000 Contributed Papers 1876, Econometric Society.
    10. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    11. Pierre Perron & Serena Ng, 1996. "Useful Modifications to some Unit Root Tests with Dependent Errors and their Local Asymptotic Properties," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 435-463.
    12. Zivot, E., 1994. "Single Equation Conditional Error Correction Model Based Tests for Cointegration," Working Papers 94-12, University of Washington, Department of Economics.
    13. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    14. Nelson C. Mark & Donggyu Sul, 2003. "Cointegration Vector Estimation by Panel DOLS and Long‐run Money Demand," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 655-680, December.
    15. Fischer, Andreas M., 2007. "Measuring income elasticity for Swiss money demand: What do the cantons say about financial innovation?," European Economic Review, Elsevier, vol. 51(7), pages 1641-1660, October.
    16. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    17. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    18. Abdelhak S. Senhadji & Claudio E. Montenegro, 1999. "Time Series Analysis of Export Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 1-2.
    19. Menzie Chinn, 2006. "A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation," Open Economies Review, Springer, vol. 17(1), pages 115-143, January.
    20. Bewley, R. A., 1979. "The direct estimation of the equilibrium response in a linear dynamic model," Economics Letters, Elsevier, vol. 3(4), pages 357-361.
    21. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
    22. Frank Neri & Kankesu Jayanthakumaran, 2005. "Trends In Manufactured Exports Across The States And Territories Of Australia 1989/1990–2000/2001: A Shift-Share Analysis," Economic Papers, The Economic Society of Australia, vol. 24(2), pages 164-174, June.
    23. Muscatelli, Vito Antonio & Stevenson, Andrew A & Montagna, Catia, 1995. "Modeling Aggregate Manufactured Exports for Some Asian Newly Industrialized Economies," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 147-155, February.
    24. Ekaterini Panopoulou & Nikitas Pittis, 2004. "A comparison of autoregressive distributed lag and dynamic OLS cointegration estimators in the case of a serially correlated cointegration error," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 585-617, December.
    25. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
    26. repec:bla:ausecp:v:37:y:1998:i:2:p:169-84 is not listed on IDEAS
    27. Murray C. Kemp, 1962. "Errors Of Measurement And Bias In Estimates Of Import Demand Parameters1," The Economic Record, The Economic Society of Australia, vol. 38(83), pages 369-372, September.
    28. Caporale, Guglielmo Maria & Chui, Michael K F, 1999. "Estimating Income and Price Elasticities of Trade in a Cointegration Framework," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 254-264, May.
    29. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tim Atkin & Ellis Connolly, 2013. "Australian Exports: Global Demand and the High Exchange Rate," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 1-10, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ekaterini Panopoulou, 2005. "A Resolution of the Fisher Effect Puzzle: A Comparison of Estimators," Money Macro and Finance (MMF) Research Group Conference 2005 18, Money Macro and Finance Research Group.
    2. Panopoulou, Ekaterini & Pantelidis, Theologos, 2016. "The Fisher effect in the presence of time-varying coefficients," Computational Statistics & Data Analysis, Elsevier, vol. 100(C), pages 495-511.
    3. Boswijk, H. Peter & Franses, Philip Hans & van Dijk, Dick, 2010. "Cointegration in a historical perspective," Journal of Econometrics, Elsevier, vol. 158(1), pages 156-159, September.
    4. Sousa, Ricardo M., 2009. "Wealth effects on consumption: evidence from the euro area," Working Paper Series 1050, European Central Bank.
    5. In Choi, 2012. "Panel Cointegration," Working Papers 1208, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    6. Sousa, Ricardo M., 2010. "Consumption, (dis)aggregate wealth, and asset returns," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 606-622, September.
    7. Vicente Esteve, 2004. "Política fiscal y productividad del trabajo en la economía española: un análisis de series temporales," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 19(1), pages 3-29, June.
    8. Helmut Herwartz & Jordi Sardà & Bernd Theilen, 2016. "Money demand and the shadow economy: empirical evidence from OECD countries," Empirical Economics, Springer, vol. 50(4), pages 1627-1645, June.
    9. Freeman, Mark C. & Groom, Ben & Panopoulou, Ekaterini & Pantelidis, Theologos, 2015. "Declining discount rates and the Fisher Effect: Inflated past, discounted future?," Journal of Environmental Economics and Management, Elsevier, vol. 73(C), pages 32-49.
    10. Bernardina Algieri, 2014. "Drivers of Export Demand: A Focus on the GIIPS Countries," The World Economy, Wiley Blackwell, vol. 37(10), pages 1454-1482, October.
    11. Marco Morales, 2014. "Cointegration testing under structural change: reducing size distortions and improving power of residual based tests," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 23(2), pages 265-282, June.
    12. Gerdesmeier, Dieter, 1996. "The role of wealth in money demand," Discussion Paper Series 1: Economic Studies 1996,05e, Deutsche Bundesbank.
    13. Ansgar Belke & Robert Czudaj, 2010. "Is Euro Area Money Demand (Still) Stable? Cointegrated VAR Versus Single Equation Techniques," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(4), pages 285-315.
    14. Huh, Hyeon-seung & Kim, David, 2013. "An empirical test of exogenous versus endogenous growth models for the G-7 countries," Economic Modelling, Elsevier, vol. 32(C), pages 262-272.
    15. Norah Al-Ballaa, 2005. "Test for cointegration based on two-stage least squares," Journal of Applied Statistics, Taylor & Francis Journals, vol. 32(7), pages 707-713.
    16. Zied Akrout & Hamid Bachouch & Salim Moualdi, 2021. "Co-integration between Corruption and Economic Growth through Investment Channels: Empirical Evidence using the ARDL Bound Testing Approach for the Tunisian Case," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 26-33.
    17. Ketenci, Natalya & Uz, Idil, 2010. "Trade in services: The elasticity approach for the case of Turkey," MPRA Paper 86596, University Library of Munich, Germany.
    18. Dennis L. Hoffman & Robert H. Rasche, 1997. "STLS/US-VECM6.1: a vector error-correction forecasting model of the U. S. economy," Working Papers 1997-008, Federal Reserve Bank of St. Louis.
    19. Breitung, Jörg & Pesaran, Mohammad Hashem, 2005. "Unit roots and cointegration in panels," Discussion Paper Series 1: Economic Studies 2005,42, Deutsche Bundesbank.
    20. Nicholas Apergis & Beatrice Simo-Kengne & Rangan Gupta, 2014. "The Long-Run Relationship Between Consumption, House Prices, and Stock Prices in South Africa: Evidence from Provincial-level Data," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 22(1), pages 83-99, January.

    More about this item

    Keywords

    manufactured exports; real exchange rates; regional;
    All these keywords.

    JEL classification:

    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp2006-01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Paula Drew (email available below). General contact details of provider: https://edirc.repec.org/data/rbagvau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.