THE RELATIONSHIP BETWEEN UNITED KINGDOM EXPORT PERFORMANCE IN MANUFACTURES AND THE INTERNAL PRESSURE OF DEMAND.

The level of manufactured exports over the sample period is highly correlated with world trade, with an elasticity of less than unity. This follows necessarily from the fact that the United Kingdom share has been falling over the period. This elasticity is, however, difficult to interpret. It may be due in the long run to the decline in our price competitive and non-price competitive position. In the short run it may be due to variations in the pressure of demand. The correlation of the trend component of world trade with relative prices and its cyclical component with variations in internal demand pressure prevents the separate estimation of these effects from the world-trade effect by multiple regression. Much of this paper has been based on the assumption that the partial short-run elasticity of United Kingdom exports with respect to world trade is unity, which allows the share of trade to be used as the dependent variable in the analysis.[2] On this assumption movements in the share are independent of the level of trade. The share of trade has been shown to fluctuate cyclically around a linear trend moving inversely with the pressure of internal demand. The analysis of this paper is based on aggregate data. This entails not only aggregation over products but also over markets. In so far as this is the case, the results conceal variation between products and between markets. At the aggregate level we mix up the adjusting patterns of different industries. It is important to emphasise therefore that research at the industry level is an essential adjunct to the work. Such research provides a firmer base from which to better interpret the results of this study. [ABSTRACT FROM AUTHOR]