EXPORT PRICING IN SINGAPORE : A COINTEGRATION APPROACH

Abstract

The focus of this thesis is to perform an empirical analysis to uncover the factors determining export pricing behaviour in Singapore. In particular, the technique of cointegration analysis is applied to study the relationship between export price, exchange rate and domestic cost of production. An error correction model is built to estimate both the long-run equilibrium relationship and the short-mu dynamic relationship between these variables.

This study reveals the extent of the pass-through effects of exchange rate on export pricing in Singapore through both the export competitiveness via our export prices in foreign currency and the cost of production via the domestic currency price of imported industrial inputs. In addition, the impact of domestic cost of production on export pricing behaviour in Singapore is examined.