preview

What Is The Demand Of Demand?

Decent Essays

Columns (2)-(4) in the table 3 show the results of different models when dependent variable is ETD1. The OLS estimates in column (2) have expected signs except the estimate of World\_GDP. The estimate of Exchange\_Vol shows that if the standard deviation increases by 1, then the ratio of export to domestic sales goes down by 0.03562 or approximately 3.6 percent. This estimate is statistically significant at 5 percent level (p-value of the estimate is 0.012). The estimate of Lag\_Exchange\_Vol is also highly statistically significant (p-value is 0.000) and shows that if the previous years standard deviation rises by 1, then the ratio of export to domestic sales falls by 0.09816 or approximately 9.8 percent. This reflects the fact that …show more content…

Nonetheless, I do not explore this issue further as the main purpose of this paper is to entangle the effect of exchange rate volatility on firm level trade, especially firm level export.\\ The estimate of World\_GDP does not have the expected sign. One may expect that a rise in the world's income will increase the demand for various goods, and this may lead to an increase in export to domestic sales ratio. However, if the increase in domestic income is larger than the increase in world's income, then we may see a negative relationship between world's income and export to domestic sales. Since I also control for GDP, a measure of domestic income, this may not be the reason of this negative estimate. In addition, this estimate of World\_GDP is neither economically (One U.S. dollar increase in World's GDP will lead to a 0.001 percent fall in the export to domestic sales) nor statistically significant(p-value of the estimate is 0.460). The estimate of size of the firms is highly economically and statistically significant(p-value is 0.000). However, there is no natural interpretation of this estimate, the only thing that we can say about this estimate is that larger firms have very high export to domestic sales ratio. In

Get Access