Domestic Demand and Export Performance in Gabon: A Single Equation Approach

Abstract

Aims: To fit well the Model underlying the New Export channel given by the domestic demand one road on the empirical side is to use instrumental variables. Then the aim of this study is to address the alternative issue with the Single Equation Approach as the instrumental variables’s result relies on the instruments. Methods: We evaluate an equation that involves only stationary variables and stationary combinations of non-stationary variables and to assess whether the equation fit well the Model we evaluate the in-of-sample prediction. In fact, the in-of-sample prediction is an alternative of the main issues to done this (i.e. evaluate the goodness of fit) to know asymptotic developments and Monte Carlo experiments as the former relies on important knowledge in Mathematics while the latter requires to master the language programming of available software.   Results: Between 1974-2021 in annual frequency for the Gabonese experience we find that the New Export channel continues to hold. In fact, the domestic demand impacts negatively exports with a negative elasticity of around 47%. But contrary to the literature the price competitiveness channel hold just in the short run, even into the Reverse causation from export dynamics to domestic demand. Conclusion: Over the standard for addressing the model goodness-of-fit as the comparison between the main findings and the existing literature, our equation fit the Model as the loss function associated to the in-of-sample prediction is less than the standard at one.