Constancy of Structural Long-Run Relations in a Cointegrated VAR Model of Export Pricing

This paper analyzes the structure and constancy of a model of export pricing. The empirical model allows for long-run relations between nonstationary variables and feedback from the foreign trade sector to domestic variables and the exchange rate. A conditional VAR model is derived from the analysis of cointegration and weak exogeneity, and the structural long-run relations of the model are identified as a market share relation and a markup pricing relation. Tests of the constancy of the long-run structure are proposed and, on balance, the hypothesis of a constant long-run structure can be maintained.