Title: An export demand equation estimation for Tunisia through an unobservable component model

Authors: Rafiaa Zayani; Kamel Helali

Addresses: Faculty of Economics and Management of Sfax, University of Sfax, Airfield Road Km 4, BP 1088, Sfax 3018, Tunisia ' Faculty of Economics and Management of Sfax, University of Sfax, Airfield Road Km 4, BP 1088, Sfax 3018, Tunisia

Abstract: This paper analysed the development of the external sector for Tunisia and its main competitors and quantified the dynamic contributions of the trade key determinants of export volumes behaviour. In addition to the traditional variables affecting export volumes, price and foreign demand, an unobservable time-varying component is involved in the export equations to capture the underlying non-price competitiveness. The structural modelling approach used within an error correction framework allows isolating the different trade fluctuations sources and assessing each variable contribution to export flows. The findings confirm the existence of stochastic trends, due to technical change and other exogenous factors, causing the export flows. Thus, the failure to take these trends into account would lead to biased long-run price elasticity estimates.

Keywords: exports; stochastic trends; competitiveness; ECM; Tunisia; export demand; unobservable component model; export volumes; structural modelling; trade fluctuations; price elasticity estimation.

DOI: 10.1504/IJBCG.2016.082202

International Journal of Business Competition and Growth, 2016 Vol.5 No.4, pp.192 - 208

Received: 16 Jul 2016
Accepted: 10 Nov 2016
Published online: 12 Feb 2017 *

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