This paper develops a demand function for Greece’s exports of manufactures according to New Trade Theory. The sample covers a rather long period of four decades with exports aggregated based on industrial rather than on trade classification. The study contributes to a better understanding of the effects of export prices, domestic and competitors’, as well as of non-price competitiveness approximated with capital stock, on export performance. The empirical estimation uses the Johansen maximum likelihood approach in the long run and a dynamic errorcorrection equation in the short run. The estimated long-run and short-run relationships follow the economic theory and are remarkably stable. It is shown that non-price competitiveness plays a vital role in explaining export performance in the long run as well as in the short run and that failure to include it in the export equation may lead to mis-specification error. As opposed to conventional models of export demand where income effects are very high, in the present study foreign income has a moderately high effect on exports in the long run and no effect in the short run. Exports are also sensitive to domestic and competitors’ prices in the long run, but cost and price competitiveness elasticities are close to one, indicating that Greek exporters have some ability to compete on the basis of prices.
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Paper provided by Bank of Greece in its series Working Papers with number
69.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Grossman, Gene M. & Helpman, Elhanan, 1995.
"Technology and trade,"
Handbook of International Economics,
in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 25, pages 1279-1337
Elsevier.
[Downloadable!] (restricted)
Other versions:
Gene M. Grossman & Elhanan Helpman, 1994.
"Technology and Trade,"
NBER Working Papers
4926, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Filippo di Mauro & Robert Anderton & Ekkehard Ernst & Laurent Maurin & Sonia Pokutova & Wim Melyn & Axel Jochem & N. M. Pakinezou & Javier Torres & Remy Lecat & Mark Cassidy & Roberto Tedeschi & Erik , 2005.
"Competitiveness and the export performance of the euro area,"
Occasional Paper Series
30, European Central Bank.
[Downloadable!]
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