THE DEMAND FOR LDC EXPORTS: ESTIMATES FROM SINGAPORE

Abstract

This article provides new evidence on both long- and short-run export demand functions for Singapore. Four determinants of exports are considered: foreign economic activity, export price, foreign prices, and exchange rate volatility. Cointegration analyses are based on the Johansen and Juselius (1990) system approach and the Stock and Watson (1993) technique. Evidence of stability is examined using two formal tests of the cointegration space. Short-run dynamic modeling is accomplished using the error-correction technique.The Hansen (1992b) test is used to determine the stability of the short-run relations. The major results show that there is a long-run equilibrium between export volume and its determinants. The inclusion of the exchange rate volatility is important for constancy of the cointegration space. The error-correction models yield results consistent with those of the cointegration analysis.

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