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Domestic Demand Pressure, Relative Prices and the Exports Supply Equation - More Empirical Evidence.

The purpose of this study is to examine this issue further, using a different country--Israel--as a case study. The exports equation of this model includes both a price variable and a measure of domestic demand so that we can examine empirically whether both variables should be included in the expor...

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Published in:Economica Vol. 47; no. 188; pp. 443 - 451
Main Author: Zilberfarb, Ben-Zion
Format: Article
Published: Wiley-Blackwell Nov80
Subjects:
Exports
Price variance
Economic demand
Demand function
International trade
Israel
Online Access:View this record in EBSCOhost
Summary:The purpose of this study is to examine this issue further, using a different country--Israel--as a case study. The exports equation of this model includes both a price variable and a measure of domestic demand so that we can examine empirically whether both variables should be included in the exports equation. Furthermore, comparing our results with previous results obtained for Israeli exports (by Halevi, 1972), we were able, using a measure of DDP that is based on the difference between potential and actual output, to demonstrate that if domestic demand pressure is erroneously omitted from the exports equation, upward-biased estimates of the price elasticity result.