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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1084:
Cointegration Analysis in an Inflationary Environment: What Can We Learn from Ukraine's Nominal Exports?

Hubert Strauß

Abstract: Ukrainian exports can be explained by standard demand theory in the long run. Using the Johansen procedure the data do not reject the hypothesis of a unit foreign-production elasticity of Ukrainian exports, which are rather price-elastic inputs for foreign producers. It is argued that due to high domestic inflation and substantial real appreciation of the hryvnia there might be a deterministic element in the long-run relationships. When allowing for a trend in the co­integration space, the identifying restriction of an infinitely price-elastic export supply curve produces best results. However, due to missing export price statistics long-run interpretations are to be taken with care because they are conditional upon assumptions on how costs and exchange-rates are passed through on export prices.

Keywords: cointegration analysis; transitional economies; Ukraine; export demand; foreign trade elasticities; real effective exchange rate; (follow links to similar papers)

JEL-Codes: F17; F31; F41; P33; (follow links to similar papers)

39 pages, November 2001

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