One interesting thing is that many collegues do not make differences between tradables and nontradables. which in small countries you coud use a rule of 6:4 in termes of prices. So it is very difficult to estimate elasticities accordingly with Marshall-Lerner conventions, since the price you are usin is an "aggregate" of tradeables and nontradebles whose adjutment path it is very different in both cases. At the end of the day devaluating the currency to become more "competitive" you are gaining at expenses of workers real income (wages) reductions, that it bread for today hunger for tomorrow. There is more in this regard but for the case of elasticities is worth to mention that we economists aggregate everything so we can get to the end with aggregated conclusions!!!. Alexander Guerrero Oxford
----- Original Message ----- From: "LE ROUX P" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Friday, November 02, 2001 7:27 AM Subject: RE: Elasticities and international trade > South Africa is a typical small open Economy. > Its currency the Rand stands at R8.54 to the dollar at present. It > fell from R0.96 in 1979 to its present value. > Mainstream economists all argue that its good since exports are > stimulated (price thus elastic) and imports discouraged (also price > elastic). > My studies (econometric) seems to indicate that both are actually > more income elastic dependent thus on overseas growth for > exports and local growth for imports. The gains are thus purely in > extra rands from exports but losses ito an increased import bill. > My problem is this: SA is a price-taker internationally and thus > cannot influence the price. A devaluating currency will this only > benefit the exporter in Rand terms since the price in $ terms > (international price) remains the same. I must be missing > something since my colleagues still beg to differ. > Please advice me on where my arguments are going wrong. > Kind Regards, > Pierre le Roux > Sub-Head > Dept Economics, > P/bag x613, > Vista University, > Port Elizabeth 6000 > South Africa > office 041 4083145 > CELL 0822024819 > FAX 041 4641563 >
