Drivers of Export Demand: A Focus on the GIIPS Countries

Bernardina Algieri

The World Economy, 2014, vol. 37, issue 10, 1454-1482

Abstract: type="main" xml:id="twec12153-abs-0001">

This study investigates the drivers of export demand in the peripheral economies of the Euro Area, namely Greece, Ireland, Italy, Portugal, and Spain (GIIPS), for the period between 1980 and 2012. Recently, several authors have pointed out that changes in trade export shares are not associated with major terms of trade disturbances; rather, they are the result of other underlying factors commonly defined as ‘non-price competitiveness’. Starting from this premise, the study extends the traditional imperfect substitute trade model to include a measure of non-price competitiveness: real capital stock. The latter is a measure of a country's total resource base and captures the presence of product differentiation and product innovation. The results show a significant link between export demand and cumulative investments. In the short-term, GIIPS exports are dominated by the movements of worldwide real income, while changes in price and non-competitiveness take longer to affect export performance. In the long-run, all three variables play a significant role in pushing exports.

Date: 2014
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