INFLUENCE OF EXCHANGE RATE AND WORLD INCOME ON EXPORTS OF ESPÍRITO SANTO STATE

Abstract

The objective of this paper was to estimate the impacts of shocks on exchange rate and world income, in the exports of Espírito Santo State, using the methodology VAR/VECM. The results showed that: a) variables are cointegrated and world income affected significantly the exports in the long-term, while the exchange rate had a negative sign and was not significant; b) estimates of short-term cointegrating vector revealed that for the variable exports of short-term imbalances are corrected quickly. It doesn't happen for variables exchange rate and world income; c) the impulse-response functions show that a shock in the exchange rate has a negative impact on exports in almost all periods after the shock (contrary to economic theory) and world income affects positively exports; and, d) the decomposition analysis of variance showed that the world income is relatively more important that the exchange rate in explaining the forecast error variance of exports.