Description

This paper estimates demand curve equations for Chilean non-copper exports, focusing on the role of the Real Exchange Rate (RER) during the period 1990-2013. This research is motivated by the substantial real depreciation over the last year which has led the Real Effective Exchange Rate (REER) to depreciate by around 15% between March 2013 and March 2014. Although, in average, relative prices would have evolved favorably for Chilean exports, this adjustment has been heterogeneous among trading partners. Based on estimates for a panel of annual data – by trading partner and economic activity – we found that export volumes would be highly sensitive to RER, especially when using a bilateral real exchange rate (BRER) measure. Sectorial analysis would indicate that agricultural exports would consistently be the most sensitive to relative price changes.