Import price formation and pricing to market: A test on Norwegian data
Working paper
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Date
1995Metadata
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- Discussion Papers [1002]
Abstract
This paper investigates the determinants of Norwegian import prices of manufactures over the period 1970(1) - 1991(4). Multivariate cointegration analysis establishes a long-run relationship between import prices, foreign prices, the exchange rate and domestic unit labour costs. Normalized on import prices, the long-run elasticities are 0.63 (foreign prices and the exchange rate) and 0.37 (domestic costs). Deviations from this relationship are highly significant in a structural import price equation, which also contains positive effects of growth in domestic demand and inflation, as well as a negative effect from the Norwegian unemployment rate. The estimated parameters appear reasonably stable within the sample.
Keywords: Import price formation, pricing to market, domestic effects, Johansen procedure, structural error correction model, super exogeneity
Publisher
Statistics Norway, Research DepartmentSeries
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