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What drives export market shares? It depends! An empirical analysis using Bayesian Model Averaging

Author

Listed:
  • Konstantins Benkovskis

    (Bank of Latvia)

  • Benjamin Bluhm

    (European Central Bank)

  • Elena Bobeica

    (European Central Bank)

  • Chiara Osbat

    (European Central Bank)

  • Stefan Zeugner

    (European Commission)

Abstract

What drives external performance of countries? This is a recurring question in academia and policy. The factors underlying export growth are receiving great attention, as countries struggle to grow out of the crisis by increasing exports and as protectionist discourses take foot again. Despite decades of debates, it is still unclear what the drivers of external performance are and, importantly, which ones policy makers can influence. We use Bayesian Model Averaging in a panel setting to investigate the drivers of export market shares of 25 EU countries, considering a wide range of traditional indicators along with novel ones developed within the CompNet. We find that export market share growth is linked to different factors in the old and new EU Member States, with one exception: for both groups, competitive pressures from China have strongly affected export performance since the early 2000s. In the case of the old EU Member States, investment, the quality of institutions and liquidity available to firms also appear to play a role. For the new EU Member States, labour and total factor productivity are particularly important, while inward FDI matters more than domestic investment. Price competitiveness does not seem to play a very important role in either set of countries: relative export prices do show correlation with export performance for the new EU Member States, but only when they are adjusted for quality. Our results point to the importance of considering the "exporting stage" of a country when discussing export-enhancing policies.

Suggested Citation

  • Konstantins Benkovskis & Benjamin Bluhm & Elena Bobeica & Chiara Osbat & Stefan Zeugner, 2017. "What drives export market shares? It depends! An empirical analysis using Bayesian Model Averaging," Working Papers 2017/02, Latvijas Banka.
  • Handle: RePEc:ltv:wpaper:201702
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    References listed on IDEAS

    as
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    Cited by:

    1. Silvia Fabiani & Alberto Felettigh & Claire Giordano & Roberto Torrini, 2019. "Making room for new competitors. A comparative perspective on Italy’s exports in the euro-area market," Questioni di Economia e Finanza (Occasional Papers) 530, Bank of Italy, Economic Research and International Relations Area.
    2. Staehr, Karsten, 2021. "Export performance and capacity pressures in Central and Eastern Europe," International Economics, Elsevier, vol. 165(C), pages 204-217.
    3. Mariam Camarero & Sergi Moliner & Cecilio Tamarit, 2019. "Searching The Us Fdi Determinants In The Eu: Is There A Euro Effect?," Working Papers 1916, Department of Applied Economics II, Universidad de Valencia.

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    More about this item

    Keywords

    export shares; competitiveness; Bayesian Model Averaging;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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