Empirical Analysis of the Demand Elasticity for Tunisian Exports

The objective of this paper is to estimate the demand elasticity for Tunisia exports using recently developed non-stationary panel methodologies. We consider quarterly data of Tunisian exports to the major European trading partners from 1987 to 2004. Our estimation results of the price and foreign income elasticities of demand for Tunisian exports suggest a positive relationship between the real exchange rate index and Tunisian export demand, both in the long-run and in the short-run. The result suggests that exchange rate policy may be effective in promoting Tunisian export demand, specifically in the long-run