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A reassessment of external demand’s contribution to Malta’s economic growth

Author

Listed:
  • Aaron George Grech

    (Central Bank of Malta)

  • Noel Rapa

    (Central Bank of Malta)

Abstract

The role of external demand in determining economic growth has undoubtedly increased as a result of globalisation. However, the conventional approach used to assess the contribution to growth of exports diminishes the positive influence of higher foreign demand by attributing to it the entire increase in a country’s import bill. Given that other components of GDP have significant import contents, this approach typically underestimates considerably the importance of external demand in driving growth. This article applies an alternative approach that uses information from input–output tables to apportion imports across all expenditure components, before assessing their relative contribution to GDP growth. When applied to Malta, one of the fastest-growing EU economies, this approach leads to a significant reassessment of external demand’s contribution to economic expansion. This is more in line with other macroeconomic indicators, such as the improvement in the country’s current account and exports-to-GDP ratio.

Suggested Citation

  • Aaron George Grech & Noel Rapa, 2019. "A reassessment of external demand’s contribution to Malta’s economic growth," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-13, December.
    • Handle: RePEc:spr:jecstr:v:8:y:2019:i:1:d:10.1186_s40008-019-0144-4
    DOI: 10.1186/s40008-019-0144-4
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    References listed on IDEAS

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    Cited by:

    1. António Rua & Fátima Cardoso, 2021. "Unveiling the real contribution of final demand to GDP growth," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    2. Aaron G. Grech & Reuben Ellul, 2021. "Are the European Commission’s Business and Consumer Survey Results Coincident Indicators for Maltese Economic Activity?," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(1), pages 91-108, April.

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    More about this item

    Keywords

    External trade; Economic growth; Contribution demand categories;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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