Domestic Demand and Export Performance in Gabon: The Issue of Cointegration

It is well established that the substitution effect between domestic and foreign sales is more relevant in countries with a lower product concentration index as the industrialized countries. Thus the main aim here to know if this new export channel is not relevant for African countries with a less diversified exports. Since the empirical testing of this negative relationship between exports and domestic sales lies on the crucial assumption of a unitary foreign demand elasticity it is then straight forward to know if this relationship and this assumption hold for African countries as industrialized countries? This is the main question, here. To address this issue we relies on conditional Error Correction Model and cointegration tests for the Gabonese case between 1974 and 2021 in annual frequency. According to the results, the assumption is well assess and domestic demand impacts effectively negatively exports with a negative elasticity of around 65 % in Gabon.