Comparative analysis of export demand for manufactures in the euro area countries

In recent decades, the goods and services exports of the euro area have shown considerable buoyancy. This strength has been particularly notable in exports of manufactured goods, which, counting both trade among the euro area countries and that with the rest of the world, rose from slightly more than 10% of GDP in the mid-1970s to around 30% of GDP in 2001. However, there are marked differences among the euro area countries both in the weight of exports in output and in their level of growth in this period. Economic theory would explain this disparate performance as due to the behaviour of the determining variables (market size and competitiveness) and to the response of exports to changes in these variables. This article provides empirical evidence of the sensitivity of each euro area country’s export demand to changes in its basic determinants and seeks to understand the reasons for these divergences and, in particular, for the differing elasticities to competitiveness. With this purpose in mind, Section 2 describes how the determinants of export demand varied in the period 1975-2002, Section 3 analyses the long- and short-term elasticities of each country’s exports and Section 4 draws the main conclusions.