Assessing the Asymmetric Relationship between Domestic Demand and Export Performance in Gabon: NARDL Modelling

Abstract

Background: Sharing the same comparative advantage in natural resources especially Oil and the same currency unit (the CFA franc), CEMAC member’s countries are a case study where external competitiveness generally taking as the Real Exchange Rate have limited Role on Exports since the price of these raw material products result from the law of supply and demand given by the international market while the nominal exchange rate have limited fluctuations on the market as in the one hand the currency is the same among us and a system of fixed parity against euro is used.  While with this kind of stylized facts of international trade the Dometic Demand is consider now as the main driving force of export performance, this with a negative relationship among them. Aims: Since it’s relevant to understand when the domestic demand have a significant negative effect on exports dynamics, is this during growth periods or period or crisis, the main criticism toward the estimates of this relationship as found in the literature is that these one don’t answer to this kind of consideration, this by the ue of conventional econometric techniques or the latest one as ARDL Modelling. Then as an contribution to fill this gap we introduce non linearity in assessing the relationship between domestic demand and exports. Method: For this purpose using data on the same time frame as in the literature (1981-2021 in annual frequency) we recover parameters estimates of this relationship for the CEMAC countries in times series modelling for Gabonese economy one of the CEMAC member’s State using Nonlinear Autoregressive Distributed Lag (NARDL) model.  Main Findings: According to the obtained results, in the short concerning the external environment the Real Exchange Rate appreciation don’t decrease exports as it’s convention into the literature than the long run. Nevertheless the classical result according to which there is a substitution effect between domestic demand and exports is observed. According to our results, during periods of crisis a decline in domestic demand would translate into growth of exports of around 49%. An comparable elasticity to that obtain in Kuikeu (2026a) at 47%. Then raising the relevance of NARDL model as an approach to recover parameter estimates f the New Export channel. Conclusion: According to the obtained results, the ARDL Modelling is a suitable framework on assessing the New Export channel as this have been done into the littérature for the same area with the Gabonese experience. In fact, as in the literature we get significant parameters estimates that means ARDL Modelling is a convenient Method for handling different set of economic problems and with the need of flexibility as in the case coming from the taking into account of the non linearity in the relationship between domestic demand and exports.