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Empirica

, Volume 42, Issue 1, pp 1–24 | Cite as

Commodity trade between EU and Egypt and Orcutt’s hypothesis

  • Mohsen Bahmani-OskooeeEmail author
  • Amr Sadek Hosny
Original Paper

Abstract

Orcutt hypothesized that trade flows respond faster to a change in the nominal exchange rate as compared to a change in relative prices. Although he recommended testing his hypothesis at commodity level, due to lack of commodity prices previous studies used aggregate trade flows of one country with the rest of the world and did not support the hypothesis. In this paper, we test Orcutt’s hypothesis using trade flows of 59 industries that trade between European Union and Egypt. These are the industries that account for 100 % of the trade between the two regions and for which price data are available. We find support for the Orcutt’s hypothesis in 1/3rd of industries.

Keywords

Orcutt’s hypothesis Egypt-EU. Trade Industry data 

JEL Classification

F31 

Notes

Acknowledgements

Valuable comments of an anonymous referee are greatly appreciated. Remaining errors, however, are authors own responsibility. The views expressed in this paper are those of the authors and should not be attributed to the University of Wisconsin-Milwaukee and to the IMF, its Executive Board, or its management.

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of Economics, The Center for Research in International EconomicsThe University of Wisconsin-MilwaukeeMilwaukeeUSA
  2. 2.International Monetary FundWashingtonUSA

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