Export, domestic sales and import: interconnection in the exporting market

Abstract

In this paper, the model of partial equilibrium of the export-oriented market has been developed. The research methodology based on the development of the duopoly model made it possible to significantly expand the analytical capabilities of the export-oriented market model. The new formulation takes into account the flows of imported products to the domestic market of the exporting country, which allows analyzing a wider range of possible scenarios. Model estimates showed that in a state close to equilibrium, it ensures the fulfillment of the following specific relationships: 1) the external supplies of the exporting country are positively related to their own production volumes. For the dependence of the external supplies of the exporting country on the volume of output in the global exporter, the conditions are specified under which it has a negative or positive relationship. In general, the nature of this relationship depends on the size of the exporting country's market, and in most cases this relationship is negative; 2) the import of the exporting country in equilibrium conditions positively depends on the output of the global exporter, solutions are found in which the dependence on the output of the exporting country can be both negative and positive; 3) the price of the domestic market of the exporting country is negatively related to the output of the global exporter, while its relationship with the production of the exporting country is negative in most cases. On the basis of the obtained model, a number of scenarios are analyzed in which the impact of supply and demand shocks on the export-oriented market is considered. In order to test the model, we considered a scenario associated with a drop in global production on the example of the barley market, which basically confirmed the adequacy of the model. The theoretical significance of the study lies in substantiating the nature of the relationships that arise in the sales markets of the exporting country, in particular, depending on the size of the exporter's sales market. The practical relevance of the model lies in its great scientific potential for solving problems related to assessing the impact of supply and demand shocks on the domestic market, with the development of measures to stabilize it.