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Mr. Claudio Montenegro and Mr. Abdelhak S Senhadji
The paper estimates export demand elasticities for a large number of developing and developed countries, using time-series techniques that account for the nonstationarity in the data. The average long-run price and income elasticities are found to be approximately -1 and 1.5, respectively. Thus, exports do react to both the trade partners’ income and to relative prices. Africa faces the lowest income elasticities for its exports, while Asia has both the highest income and price elasticities. The price and income elasticity estimates have good statistical properties.
Mr. Claudio Montenegro and Mr. Abdelhak S Senhadji

invalidates classical statistical inference. Thus, if the variables that enter the export demand equation are found to contain a unit root, ignoring nonstationarity in these variables may lead to incorrect inferences. This paper tackles this problem by deriving a tractable export demand equation that can be estimated, within the data constraints, for a large number of countries using recent time series techniques that address the nonstationarity of the data. The same methodology has been used to estimate the import demand elasticities, (see Senhadji, 1998 ). A related

Mr. Abdelhak S Senhadji and Mr. Claudio Montenegro

Section II presents the results. Concluding remarks are contained in Section III. I. The Model The model is derived from dynamic optimization (for details, see Senhadji and Montenegro, 1998 ). More specifically, the export demand equation has the following form: log ( x 1 ) = γ 0 + γ 1 log ( x 1 - 1 ) + γ 2 log ( x t ) + γ 3 log ( g d p x t * ) + ε t

Ms. Sònia Muñoz

substitutes model proposed by Goldstein and Khan (1985) . The major assumption of the model is that neither imports nor exports are perfect substitutes for domestic goods. Exports are imperfect substitutes in world markets for other countries’ domestically produced goods, or third countries’ exports. According to conventional demand theory, consumers maximize utility subject to a budget constraint. In this respect, export demand is specified as a function of the real exchange rate and the real incomes of the rest of the world. Thus, the export demand equation can be

International Monetary Fund. Western Hemisphere Dept.

period of 1986:Q1–13:Q4, of which 21 products belong to the manufacturing sector. We then make assessments of their actual export performance using the respective model-estimated benchmarks obtained from the export demand equations. In the second part of the paper, we check whether the observed post-crisis performance of individual products is substantial by historical standards, by testing for possible structural breaks around the crisis period. For this, we adopt the multiple structural change identification method proposed by Bai and Perron ( 1998 , 2003 ), which

Mr. Antonio Spilimbergo and Mr. Athanasios Vamvakidis
The real effective exchange rate is an aggregation of several bilateral real exchange rates with respect to other countries. The aggregation is usually done under the assumption of constant elasticity of substitution (CES) between products from different countries. We investigate the validity of this assumption by estimating manufacturing export equations for 56 countries over 26 years. We find that the hypothesis of CES is rejected and that the export equations that contain two real effective exchange rates (one in relation to OECD countries and one in relation to non-OECD countries) perform on average considerably better than the traditional ones.