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On domestic demand and export performance in the euro area countries: Does export concentration matter?

Author

Listed:
  • Paulo Soares Esteves

    (Banco de portugal)

  • Elvira Prades

    (Banco de España)

Abstract

During economic downturns, weak domestic demand developments seem to be an additional driver of exports, as firms increase their efforts to serve markets abroad to compensate the fall in domestic sales. This may constitute an additional mechanism adjustment for the euro area countries where real exchange rate variations are limited by the common currency itself and the present low inflation environment. However, this substitution effect between domestic and foreign sales could be different across euro area members. This paper uses panel data techniques to assess the role of the export structure in explaining these differences. Building a novel indicator for product concentration, the results suggest that domestic demand developments are more relevant to explain exports in countries with a lower product concentration index (that is, more diversified exports). This contributes to explain why euro area countries under stress registered different economic performance during the most recent years.

Suggested Citation

  • Paulo Soares Esteves & Elvira Prades, 2017. "On domestic demand and export performance in the euro area countries: Does export concentration matter?," Working Papers 1719, Banco de España.
    • Handle: RePEc:bde:wpaper:1719
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    Cited by:

    1. Kristian Orsini & Mario Pletikosa, 2019. "Croatia's Tourism Industry – Part 2: Curse or Blessing?," European Economy - Economic Briefs 047, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Álvarez López, M.ª Elisa & Vega Crespo, Josefa, 2017. "La fortaleza competitiva de la economía española/The Competitive Strength of the Spanish Economy," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 35, pages 7-34, Enero.
    3. Ansgar Belke & Jan Wagemester, 2017. "Export Hysteresis, Capacity Constraints, and Uncertainty: A Smooth Transition Analysis for Euro Area Member Countries," CESifo Economic Studies, CESifo Group, vol. 63(3), pages 270-294.
    4. Saša Jakšić & Nataša Erjavec & Boris Cota, 2019. "The role of foreign direct investment and labor productivity in explaining croatian regional export dynamics," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 27(3), pages 835-849, September.
    5. Nazlı Karamollaoğlu & Cihan Yalçin, 2020. "Exports, real exchange rates and dollarization: empirical evidence from Turkish manufacturing firms," Empirical Economics, Springer, vol. 59(5), pages 2527-2557, November.

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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • F10 - International Economics - - Trade - - - General

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