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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
    1. Jose Guilherme Reis & Thomas Farole, 2012. "Trade Competitiveness Diagnostic Toolkit," World Bank Publications, The World Bank, number 2248, July.
    2. Martin Feldkircher & Stefan Zeugner, 2009. "Benchmark Priors Revisited; On Adaptive Shrinkage and the Supermodel Effect in Bayesian Model Averaging," IMF Working Papers 09/202, International Monetary Fund.
    3. Konstantins Benkovskis & Julia Wörz, 2012. "Non-Price Competitiveness Gains of Central, Eastern and Southeastern European Countries in the EU Market," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 27-47.
    4. Enrique Moral-Benito, 2012. "Determinants of Economic Growth: A Bayesian Panel Data Approach," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 566-579, May.
    5. World Bank & International Finance Corporation, 2013. "Doing Business 2014 : Understanding Regulations for Small and Medium-Size Enterprises," World Bank Publications, The World Bank, number 16204, July.
    6. Osbat, Chiara & Zollino, Francesco & Aiello, Giovanni & Bluhm, Benjamin & Buelens, Christian & Cavallini, Flavia & Joseph, Andreas & Leonte, Alexandru & Lommatzsch, Kirsten & Momchilov, Georgi & Giord, 2015. "Compendium on the diagnostic toolkit for competitiveness," Occasional Paper Series 163, European Central Bank.
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    9. Christian Schitter & Maria Silgoner & Katharina Steiner & Julia Wörz, 2012. "Fishing in the same pool: Export strengths and competitiveness of China and CESEE at the EU-15 Market," FIW Working Paper series 096, FIW.
    10. Michael Danquah & Enrique Moral-Benito & Bazoumana Ouattara, 2014. "TFP growth and its determinants: a model averaging approach," Empirical Economics, Springer, vol. 47(1), pages 227-251, August.
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    More about this item

    Keywords

    export shares; competitiveness; Bayesian Model Averaging;

    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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