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

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  • Paulo Soares Esteves
  • António Rua

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

  • Paulo Soares Esteves & António Rua, 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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    Cited by:

    1. Jean Pisani-Ferry & André Sapir & Guntram B. Wolff, . "EU-IMF assistance to euro area countries: an early assessment," Blueprints, Bruegel, number 779.
    2. repec:kap:openec:v:29:y:2018:i:1:d:10.1007_s11079-017-9457-9 is not listed on IDEAS
    3. Gnimassoun, Blaise, 2015. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 36-74.
    4. Belke, Ansgar & Oeking, Anne & Setzer, Ralph, 2014. "Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries," CEPS Papers 9228, Centre for European Policy Studies.
    5. Elena Bobeica & Paulo Soares Esteves & António Rua & Karsten Staehr, 2016. "Exports and domestic demand pressure: a dynamic panel data model for the euro area countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 107-125, February.
    6. Olivier Blanchard & Pedro Portugal, 2017. "Boom, slump, sudden stops, recovery, and policy options. Portugal and the Euro," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(3), pages 149-168, December.
    7. Tkačevs, Olegs & Christodoulopoulou, Styliani & Bobeica, Elena, 2016. "The role of price and cost competitiveness for intra- and extra-euro area trade of euro area countries," Working Paper Series 1941, European Central Bank.
    8. Matteo Bugamelli & Silvia Fabiani & Stefano Federico & Alberto Felettigh & Claire Giordano & Andrea Linarello, 2018. "Back on Track? A Macro–Micro Narrative of Italian Exports," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(1), pages 1-31, March.
    9. Ansgar Belke & Anne Oeking & Ralph Setzer, 2013. "Exports and Capacity Constraints – A Smooth Transition Regression Model for Six Euro Area Countries," ROME Working Papers 201313, ROME Network.
    10. Ansgar Belke & Daniel Gros & Alcidi Cinzia & Leonor Coutinho & Alessandro Giovannini, 2014. "Exit State-of-play in Implementing Macroeconomic Adjustment Programmes in the Euro Area," ROME Working Papers 201405, ROME Network.
    11. Styliani Christodoulopoulou & Oļegs Tkačevs, 2016. "Measuring the effectiveness of cost and price competitiveness in external rebalancing of euro area countries: What do alternative HCIs tell us?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(3), pages 487-531, August.
    12. Ansgar Belke & Anne Oeking & Ralph Setzer, 2015. "Exports and Capacity Constraints: Evidence for Several Euro Area Countries," CESifo Working Paper Series 5455, CESifo Group Munich.
    13. Christoph Fischer & Oliver Hossfeld & Karin Radeck, 2018. "On the Suitability of Alternative Competitiveness Indicators for Explaining Real Exports of Advanced Economies," Open Economies Review, Springer, vol. 29(1), pages 119-139, February.
    14. repec:zag:zirebs:v:20:y:2017:i:2:p:33-48 is not listed on IDEAS
    15. repec:mje:mjejnl:v:12:y:2017:i:2:p:141-150 is not listed on IDEAS
    16. Alexander F. McQuoid & JaeBin Ahn, 2015. "Capacity Constrained Exporters: Identifying Increasing Marginal Cost," Departmental Working Papers 49, United States Naval Academy Department of Economics.
    17. Soares Esteves, Paulo & Prades, Elvira, 2016. "On domestic demand and export performance in the euro area countries: does export concentration matter?," Working Paper Series 1909, European Central Bank.
    18. Bugamelli, Matteo & Gaiotti, Eugenio & Viviano, Eliana, 2015. "Domestic and foreign sales: Complements or substitutes?," Economics Letters, Elsevier, vol. 135(C), pages 46-51.
    19. Belke, Ansgar & Oeking, Anne & Setzer, Ralph, 2015. "Domestic demand, capacity constraints and exporting dynamics: Empirical evidence for vulnerable euro area countries," Economic Modelling, Elsevier, vol. 48(C), pages 315-325.
    20. repec:mje:mjejnl:v:13:y:2017:i:2:p:141-150 is not listed on IDEAS
    21. Ansgar Belke & Anne Oeking & Ralph Setzer, 2014. "Domestic demand pressure and export dynamics – An empirical threshold model analysis for six euro area countries," EcoMod2014 6780, EcoMod.
    22. Gros, Daniel & Alcidi, Cinzia & Belke, Ansgar & Coutinho, Leonor & Giovannini, Alessandro, 2014. "State-of-Play in Implementing Macroeconomic Adjustment Programmes in the Euro Area," Ruhr Economic Papers 482, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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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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