Price setting behaviour for traded goods--The Irish case.

The theoretical framework assumes that Irish importers and exporters operate in perfectly competitive markets for labour and capital and final output, but may face downward-sloping demand curves in the purchase and sale of imports and exports (all of which are assumed to be intermediate goods--a not unrealistic assumption given the category of traded goods considered in this paper, namely manufactured goods in the Standard International Trade Classification 5-8 inclusive). The exporters exploit this monopolistic power to charge what the market will bear and thus the price of exports deviates from the competitive price by an amount that can be estimated. An analogous argument holds for importers. As a by-product of this exercise several other important coefficients relating to the domestic technology are also estimated.
The plan of the paper is as follows. Section II briefly outlines the Appelbaum-Kohli theoretical model. Section III presents the final forms of the export and import models to be estimated. Section IV reports the results of estimating the respective models using both quarterly and semi-annual data. Finally, Section V contains some comments on the implications of the results and some concluding remarks. [ABSTRACT FROM AUTHOR]