Volume 237, Issue 4 -

Gravity and pricing to market (PTM) models have been used to elaborate determinants of bilateral trade and export pricing for different countries and branches. Typically, only one of the two methods was chosen. We show in a stepwise approach how a combination of both methods can reveal novel results on the determinants of exports and export pricing behaviour. For the case of German beer exports, we show that structural differences exist between markets on which exporters apply either PTM or non-PTM strategies. German beer exporters apply PTM strategies, in particular local-currency stabilization, on those markets where imports are very sensitive to exchange-rate changes. Non-PTM strategies, i. e. full exchange-rate transmission, occur on export markets with insensitive reactions. Apart from PTM strategies, German beer exports are strongly dependent on policy variables such as the introduction of the Euro and the partner country’s membership in the EU.

Historically, forecasters have failed to predict cyclical turning points and the forecasting record in this regard has not improved. This suggests that we should focus on what should be an easier task, recognizing recessions as they occur. We present a new approach that will enable us to determine in real-time when there is a significant deviation from an economy’s dynamic growth path. This approach uses a CUSUM-like methodology and requires us to construct an index,that we call the Economic News Index, from real-time data that shows how the economy is functioning. We apply this approach to German data to nowcast the recessions that began in 2008 and 2012.