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Venting out: exports during a domestic slump

Miguel Almunia (), Pol Antras, David López-Rodríguez () and Eduardo Morales ()
Additional contact information
David López-Rodríguez: Banco de España
Eduardo Morales: Princeton University, NBER and CEPR

No 1844, Working Papers from Banco de España, Working Papers Homepage

Abstract: We exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows. Spanish manufacturing firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms’ supply determinants (such as labor costs). This negative relationship between demand-driven changes in domestic sales and changes in export flows illustrates the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize our findings through a standard heterogeneous-firm model of exporting expanded to allow for non-constant marginal costs of production. Using a structurally estimated version of this model, we conclude that the firm-level responses to the slump in domestic demand in Spain could well have accounted for around one-half of the spectacular increase in Spanish goods exports (the so-called “Spanish export miracle”) over the period 2009-13.

Keywords: vent-for-surplus; exports; domestic slump; increasing marginal cost (search for similar items in EconPapers)
JEL-codes: F12 F14 F62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2018-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 18/Files/dt1844e.pdf First version, December 2018 (application/pdf)

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Working Paper: Venting Out: Exports During a Domestic Slump (2018) Downloads
Working Paper: Venting Out: Exports During a Domestic Slump (2018) Downloads
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