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Is there a role for domestic demand pressure on export performance?

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  • António Rua
  • Paulo Esteves

Abstract

Traditionally, exports behavior is modeled only as a function of the foreign demand and the real exchange rate. However, it is by now widely acknowledged that these variables are not able to fully explain exports developments. This paper suggests considering domestic demand pressure as an additional variable, revisiting its economic rationale and assessing its empirical importance. In particular, we consider the Portuguese case and find that domestic demand developments are relevant for the short-run dynamics of exports. Moreover, it is found that such relationship is asymmetric, being stronger and more significant when domestic demand is falling than when it is increasing.

Suggested Citation

  • António Rua & Paulo Esteves, 2013. "Is there a role for domestic demand pressure on export performance?," Working Papers w201303, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w201303
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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
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F10 - International Economics - - Trade - - - General

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