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The price elasticity of external demand: how does Portugal compare with other euro area countries?

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  • Sónia Cabral
  • Cristina Manteu

Abstract

This paper estimates the price elasticity of external demand of Portuguese exports in the period 1995-2009 and compares it with those of other euro area countries. This proxy of the export price elasticity is computed as a weighted average of the import demand elasticities in each individual country-product destination market, using the elasticities of substitution across imported varieties of Broda et al. (2006). Overall, Portugal tends to export to individual markets which have, on average, a lower price elasticity than the markets where other euro area countries export to. Therefore, the product and geographical composition of Portuguese exports reduces their exposure to relative price fluctuations.

Suggested Citation

  • Sónia Cabral & Cristina Manteu, 2011. "The price elasticity of external demand: how does Portugal compare with other euro area countries?," Working Papers w201127, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w201127
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp201127.pdf
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    References listed on IDEAS

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    1. McDaniel, Christine A. & Balistreri, Edward J., 2002. "A Discussion on Armington Trade Substitution Elasticities," Working Papers 15856, United States International Trade Commission, Office of Economics.
    2. Christian Broda & Joshua Greenfield & David Weinstein, 2006. "From Groundnuts to Globalization: A Structural Estimate of Trade and Growth," NBER Working Papers 12512, National Bureau of Economic Research, Inc.
    3. João Amador & Sónia Cabral & José R. Maria, 2007. "International Trade Patterns over the Last Four Decades: How does Portugal Compare with other Cohesion Countries?," Working Papers w200714, Banco de Portugal, Economics and Research Department.
    4. João Amador & Sónia Cabral, 2009. "Portuguese International Trade in Services," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    5. Blonigen, Bruce A. & Soderbery, Anson, 2010. "Measuring the benefits of foreign product variety with an accurate variety set," Journal of International Economics, Elsevier, vol. 82(2), pages 168-180, November.
    6. Alberto Felettigh & Stefano Federico, 2011. "Measuring the price elasticity of import demand in the destination markets of italian exports," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2011(1), pages 127-162.
    7. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    8. Paulo Soares Esteves & Sónia Cabral, 2006. "Portuguese Export Market Shares: An Analysis by Selected Geographical and Product Markets," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    9. Timothy J. Sturgeon & Olga Memedovic & Johannes Van Biesebroeck & Gary Gereffi, 2009. "Globalisation of the automotive industry: main features and trends," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 2(1/2), pages 7-24.
    10. Feenstra, Robert & Luck, Philip & Obstfeld, Maurice & Russ, Katheryn N., 2014. "In Search of the Armington Elasticity," CEPR Discussion Papers 9951, C.E.P.R. Discussion Papers.
    11. João Amador & Sónia Cabral, 2008. "The Portuguese Export Performance in Perspective: A Constant Market Share Analysis," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    12. João Amador & Luca David Opromolla, 2009. "Textiles and Clothing Exporting Sectors in Portugal - Recent Trends," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
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    Cited by:

    1. D. Siena, 2014. "The European Monetary Union and Imbalances: Is it an Anticipation Story ?," Working papers 501, Banque de France.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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