Title: Orcutt's hypothesis revisited: evidence from commodity prices

Authors: Mohsen Bahmani-Oskooee; Amr Sadek Hosny

Addresses: Department of Economics, The Center for Research in International Economics, The University of Wisconsin-Milwaukee Milwaukee, WI 53201, USA ' International Monetary Fund, 700 19th Street, N.W., Washington, D.C. 20431, USA

Abstract: In 1950, Orcutt conjectured that trade flows respond to changes in the exchange rate faster than to changes in relative prices. Previous research that tested Orcutt's hypothesis used aggregate trade flows of one country with the rest of the world and did not find much support for the hypothesis. Due to lack of commodity prices, no study has attempted to test Orcutt's conjecture at commodity level. Now that we have come across such price data for 36 industries that trade between the USA and Egypt, we test the Orcutt's hypothesis using industry level data and provide support for the hypothesis in 50% of the cases.

Keywords: Orcutt's hypothesis; Egypt-USA trade; industry data; Egypt; USA; United States; commodity prices; trade flows; exchange rate.

DOI: 10.1504/IJPP.2015.070555

International Journal of Public Policy, 2015 Vol.11 No.4/5/6, pp.152 - 168

Received: 03 Sep 2014
Accepted: 08 Oct 2014

Published online: 10 Jul 2015 *

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