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Exports and real exchange rates in a small open economy

Author

Listed:
  • Alvaro Brunini

    (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economí­a)

  • Gabriela Mordecki

    (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)

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.

Suggested Citation

  • Alvaro Brunini & Gabriela Mordecki & Lucí­a Ramí­rez, 2013. "Exports and real exchange rates in a small open economy," Documentos de Trabajo (working papers) 13-15, Instituto de Economía - IECON.
    • Handle: RePEc:ulr:wpaper:dt-15-13
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    File URL: https://hdl.handle.net/20.500.12008/4230
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    References listed on IDEAS

    as
    1. Rudiger Dornbusch, 1988. "Real Exchange Rates and Macroeconomics: A Selective Survey," NBER Working Papers 2775, National Bureau of Economic Research, Inc.
    2. Gabriela Mordecki & Matí­as Piaggio, 2008. "Integración regional : ¿el crecimiento económico a través de la diversificación de exportaciones?," Documentos de Trabajo (working papers) 08-11, Instituto de Economía - IECON.
    3. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    More about this item

    Keywords

    exports; sectoral real exchange rate; cointegration;
    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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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