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Long-run price and income elasticities of demand for Hong Kong exports: a structural cointegrating VAR approach

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>1/05/2002
<mark>Journal</mark>Applied Economics
Issue number8
Volume34
Number of pages7
Pages (from-to)1025-1032
Publication StatusPublished
<mark>Original language</mark>English

Abstract

This article revisits a system of export volume and price equations to estimate the long–run price and income effects in the demand for Hong Kong's exports. Using a recently developed restricted cointegrating VAR approach it tests theorybased restrictions and obtains estimates of the long–run structural coefficients. The estimation results provide supporting evidence for the theory–based restrictions and suggest that the demand for Hong Kong's exports is both price and income elastic. This article is therefore able to present a long–run model of Hong Kong's exports that is both theory and data consistent, and long–run elasticities that are economically interpretable. The short–run properties of the model are illustrated by means of persistence profiles, which confirm the cointegrating vectors tendency of convergence.