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Published online by Cambridge University Press: 26 March 2020
This note constitutes a second report on work undertaken at the National Institute to assist in the forecasting of exports. Some time ago, an article was published which explained how the regular forecasting of growth rates in real national product of industrial countries was used as a base for providing predictions of the value of trade in manufactures between these countries, and the share of United Kingdom exports to them. The present note describes how an attempt was made to supplement these predictions by a forecast for United Kingdom exports to primary producing countries.
Preparation of this article at the National Institute was initiated by A. H. C. Broadbent and E. A. Anyanwu and completed, after their departure to J. Henry Schroder Wagg and the Board of Trade respectively, by N. Garganas of the National Institute.
(1) G. A. Renton, ‘Forecasting British exports of manufactures to industrial countries’, National Institute Economic Review no. 42, November 1967, pages 35-51.
(2) For the purposes of this article the primary producers are taken to be the non-OECD countries, less Eastern Europe and the People's Republic of China, plus Finland (see list of country groups on page 85).
(1) The hypotheses can be tested either by data of OECD trade with the primary producers as reported by the OECD member countries or by data of the primary producing countries' total trade as reported by the countries themselves. While the first set excludes intra-trade, the second double counts it and to use the second set would be to include intra-trade in a variable dependent upon OECD industrial production, which, on a priori grounds, is not acceptable. There are other reasons also for preferring OECD data: the possibility of there being errors of measurement and therefore estimation bias should be less; they are more up to date and published in a more easily available format; and United Kingdom exports are not likely to be competitive with primary producers' exports.
(2) Of their total exports, excluding intra-trade, about 971/2 per cent in fact goes to OECD countries.
(1) Various distributed lag forms were tried without improve ment on the simpler forms.
(2) The coefficients of the level and share equations are not strictly comparable.
(1) For a derivation of the formula required to calculate an own price elasticity from the elasticity of substitution, see Arnold C. Harberger, ‘Some evidence on the international price mechanism’, Journal of Political Economy, December 1957, page 514. It has been derived here by applying the approximate mean United Kingdom share in total OECD exports over the sample period, i.e. 20 per cent.
(1) See National Institute Economic Review no. 44, May 1968 page 110.
(1) See L. B. Krause, ‘British trade performance’, in R. E. Caves and Associates, ‘Britain's economic prospects’, George Allen & Unwin Ltd, London, 1967.