R. Cronovich et R. Gazel, DO EXCHANGE-RATES AND FOREIGN INCOMES MATTER FOR EXPORTS AT THE STATE-LEVEL, Journal of regional science, 38(4), 1998, pp. 639-657
At the national level, trade-weighted real exchange rates and foreign
incomes significantly impact exports. At the subnational level, these
variables are generally insignificant in the few studies that include
them. We argue that the standard use of national trade weights in the
construction of subnational trade-weighted averages of exchange rates
and foreign incomes is inappropriate, and we then construct these vari
ables using state-specific trade weights. In our panel data analysis o
f state-level manufacturing exports, these variables enter significant
ly and with the expected signs. Also, their out-of-sample forecasting
ability is significantly better than that of the national trade-weight
ed variables.