Stability Analysis of Australia’s Wool Exports- A Markov Chain Model

The present study is an attempt to analyse growth, instability and direction of trade of wool exports from Australia. Compound Annual Growth Rate, Cuddy-Della Valle Index and Markov chain analysis are the tools used for analysing data from 2008 to 2017. The growth rate of export in terms of quantity is negative and very low (-0.59% per annum) and the growth rate of exports in terms of value is positive (3.99% per annum). The instability index is low (2.78%) for exports in quantity terms and is medium (18.10%) for exports in value terms. China is the most stable market for export of wool from Australia with retention probability of 80.08%. The other reliable importers are Republic of Korea and Czech Republic. The study suggested the need to diversify Australian wool market.