Determinants of Export and Import Functions in the EU Member Countries

Mirdala, Rajmund and Semančíková, Jozefína and Ruščáková, Anna (2019): Determinants of Export and Import Functions in the EU Member Countries. Published in: Journal of Economics (Ekonomický časopis) , Vol. 66, No. 9 (November 2019): pp. 901-930.

Abstract

Current account imbalances and their sustainability in the European Union member countries has been examined in the recent empirical literature since the establishment of the Euro Area. Deeper trade integration within the European Union is generally beneficial. However, international frag-mentation of production resulting from emergence of global value chains deepens external imbalances due to persisting differences in macroeconom-ic performance among member countries. The main objective of the paper is to examine effects of price and non-price determinants of exports and imports in 21 European Union member coun-tries. We have estimated the determinants of export and import demand functions in the 21 European Union member countries. Our results indicate the high role of imports in aggregate export functions, while aggregate functions indicated a high contribution of domestic demand to the imports dynamics. Disaggregated analysis revealed the importance of intermediates in the external trade within and outside the European Union from territorial and commodity aspects.

• Item Type: MPRA Paper
• Language: English
• Keywords: current account, external balance, export, import, global value chains
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus

References

AHN, J. – MANO, R. – ZHOU, J. (2017): Real Exchange Rate and External Balance: How Im-portant Are Price Deflators? [IMF Working Paper 2017/81.] Washington, DC: International Monetary Fund. 49 pp.

ALI-YRKKÖ, J. – MATTILA, J. – SEPPÄLÄ, T. (2017): Estonia in Global Value Chains. [ETLA Reports, No. 69.] Helsinki: Elinkeinoelämän tutkimuslaitos. 28 pp.

ALLARD, C. et al. (2005): France, Germany, Italy, and Spain: Explaining Differences in External Sector Performance Among Large Euro Area Countries. [IMF Country Report, No. 05/401.] Washington, DC: International Monetary Fund. 36 pp.

AMADOR, J. – CAPPARIELLO, R. – STEHRER, R. (2015): Global Value Chains: A View from the Euro Area. [ECB Working Paper, No. 1761.] Frankfurt am Main: European Central Bank. 24 pp.

BALTAGI, B. H. – GRIFFIN, J. M. – XIONG, W. (2000): To Pool or Not to Pool: Homogeneous versus Heterogeneous Estimators Applied to Cigarette Demand. Review of Economics and Statistics, 82, No. 1, pp. 117 – 126.

BARRELL, R. – DÉES, S. (2005): World Trade and Global Integration in Production Processes: A Re-assessment of Import Demand Equations. [ECB Working Paper, No. 503.] Frankfurt am Main: European Central Bank. 38 pp.

BAYOUMI, T. – HARMSEN, R. – TURUNEN, J. (2011): Euro Area Export Performance and Competitiveness. [IMF Working Paper 11/140.] Washington, DC: International Monetary Fund. 17 pp.

BELKE, A. – DREGER, CH. (2011): Current Account Imbalances in the Euro Area: Catching Up or Competitiveness? [DIW Discussion Papers, No. 1106/2011.] Berlin: German Institute for Economic Research. 21 pp.

BELESSIOTIS, T. – CARONE, G. (1997): A Dynamic Analysis of France’s External Trade. De-terminants of Merchandise Imports and Exports and their Role in the Trade Surplus of the 1990s. [European Economy Economic Papers, No. 122.] Luxembourg: European Communities. 68 pp.

BERGER, H. - NITSCH, V. (2012) Bilateral Imbalances in Europe, [Darmstadt Discussion Papers in Economics, No. 214/2012], Darmstadt, Darmstadt University of Technology, 21 p.

BLACKBURNE, E. F. – FRANK, M. W. (2007): Estimation of Nonstationary Heterogeneous Panels. Stata Journal, 7, No. 2, pp. 197 – 208.

BONATTI, L. - FRACASSO, A. (2013). The German Model and the European Crisis. JCMS: Journal of Common Market Studies, 51, No. 6, pp. 1023 - 1039

BRANCACCIO, E. (2012). Current Account Imbalances, the Eurozone Crisis, and a Proposal for a „European Wage Standard“. International Journal of Political Economy, 41, No. 1, pp. 47 - 65

BRUMM, J. – GEORGIAS, G. – GRÄB, J. (2016): Global Value Chains Participation and Current Account Imbalances. In: International Trade and Macroeconomic Interdependence in the Age of Global Value Chains. [Conference, September 15 – 16, 2016.] Vilnius: Bank of Lithuania, 29 pp.

BUSSIÈRE, M. T. et al. (2013): Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008 – 2009. American Economic Journal: Macroeconomics, 5, No. 3, pp. 118 – 151.

CA’ ZORZI, M. – SCHNATZ, B. (2007): Explaining and Forecasting Euro Area Exports: Which Competitiveness Indicator Performs Best? [ECB Working Paper, No. 833.] Frankfurt am Main: European Central Bank. 33 pp.

CAMARERO, M. – TAMARIT, C. (2004): Estimating the Export and Import Demand for Manu-factured Goods: The Role of FDI. Review of World Economics, 140, No. 3, pp. 347 – 375.

CASERATTO, S. (2015). Balance of Payments or Monetary Sovereignty? In Search of The Emu’s Original Sin: Comments on Marc Lavoie’s “The Eurozone: Similarities to and Differences from Keynes’s Plan”. International Journal of Political Economy, 44, No. 2, pp. 142 - 156

CHEN, R. – MILESI-FERRETTI, G. M. – TRESSEL, T. (2012): External Imbalances in the Euro Area. [IMF Working Paper 12/236.] Washington, DC: International Monetary Fund. 51 p.

CHRISTODOULOPOULOU, S. – TKAČEVS, O. (2014): Measuring the Effectiveness of Cost and Price Competitiveness in External Rebalancing of Euro Area Countries: What do Alternative HCIS Tell Us? [ECB Working Paper 1736.] Frankfurt am Main: European Central Bank. 36 pp.

CINGOLANI, I. – FELICE, G. – TAJOLI, L. (2015): External Imbalances in the European Union and International Fragmentation of Production: Is there a Link? [Centro Studi Luca D’agliano Development Studies Working Papers, No. 386.] Torino: Centro Studi Luca D’agliano. 38 pp.

COMUNALE, M. – HESSEL, J. (2014): Current Account Imbalances in the Euro Area: Competi-tiveness or Financial Cycle? [DNB Working Paper, No. 443.] Amsterdam: De Nederlandsche Bank NV. 51 pp.

DARVAS, Z. (2012): Intra-Euro Rebalancing is Inevitable, but Insufficient. Bruegel Policy Contri-butions, 15, August, pp. 2 – 12

DE GRAUWE, P. (2013): Design Failures in the Eurozone: Can They Be Fixed? [LSE “Europe in Questions” Discussion Paper, No. 57.] London: London School of Economics. 35 pp.

EUROPEAN COMMISSION (2009a): Special Report: Competitiveness Developments within Euro Area. Quarterly Report on the Euro Area, 8, No. 1, pp. 1 – 54.

EUROPEAN COMMISSION (2009b): Economic Crisis in Europe: Causes, Consequences and Responses. [European Economy, No. 7/2009.] Brussels: European Commission. 90 pp.

EUROPEAN COMMISSION (2010): Quarterly Report on the Euro Area II/2010. Directorate-General for Economic and Financial Affairs, 9, No. 2, pp. 1 – 38.

FALZONI, A. M. – TAJOLI, L. (2015): International Fragmentation of Production and Trade Vola-tility: An Analysis for the European Countries. Modern Economy, 6, No. 3, pp. 358 – 369.

FONTAGNÉ, L. – FREUDENBERG, M. – GAULIER, G. (2007): A Systematic Decomposition of World Trade into Horizontal and Vertical IIT. Review of World Economics, 142, No. 3, pp. 459 – 475.

FUKUMOTO, M. (2012): Estimation of China’s Disaggregate Import Demand Functions. China Economic Review, 23, No. 2, pp. 434 – 444.

GABRISCH, H. – STAEHR, K. (2015): The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries. Journal of Common Market Studies, 53, No. 3, pp. 558 - 576

GAULIER, G. – LEMOINE, F. – ÜNAL-KESENCI, D. (2007): China’s Emergence and the Reor-ganization of Trade Flows in Asia. China Economic Review, 18, No. 3, pp. 209 – 243.

GAULIER, G. – VICARD, V. (2012): Current Account Imbalances in the Euro Area: Competitive-ness or Demand Shock? [BDF Quarterly Selection of Articles, No. 27/2012.] Paris: Banque de France. 26 pp.

GIORDANO, C. – ZOLLINO, F. (2015): Exploring Price and Non-price Determinants of Trade Flows in the Largest Euro Area Countries. [Working Paper Series, No. 1789/May 2015.] Frank-furt am Main: European Central Bank. 35 pp.

GOLDSTEIN, M. – KHAN, M. S. (1985): Income and Price Effects in Foreign Trade. Handbook of International Economics, 2, Chap. 21, pp. 1041 – 1105.

GOUHER, A. – ANWAR, A.-G. – TARIQ, M. (2017): The Global Financial Crisis and Interna-tional Trade. Asian Economic and Financial Review, 7, No. 6, pp. 600 – 610.

GOZGOR, G. – OKTAY, E. (2013): Estimation of Disaggregated Import Demand Functions for Turkey. Economics Bulletin, 33, No. 1, pp. 575 – 585.

HOBZA, A. - ZEUGNER, S. (2014) The ‘Imbalanced Balance’ and its Unravelling: Current Ac-counts and Bilateral Financial Flows in zhe Euro Area, [EC Economic Papers, No. 520/2014], Brussels, European Commission, 25 p.

HOLINSKI, N. - KOOL, C.J.M. - MUYSKEN, J. (2012) Persistent Macroeconomic Imbalances in the Euro Area: Causes and Consequences, Federal Reserve Bank of St. Louis Review, 94, No. 1, 20 p.

HOOPER, P. – JOHNSON, K. – MARGUEZ, J. (2000): Trade Elasticities for the G7 Countries. [Princeton Studies in International Finance 87.] Princeton, NJ: Princeton University. 72 pp.

HUBRICH, K. S. – KARLSSON, T. (2010): Trade Consistency in the Context of the Eurosystem Projection Exercises: An Overview. [ECB Occasional Paper Series, No. 108.] Frankfurt am Main: European Central Bank. 49 pp.

IM, K. S. – PESARAN, M. H. – SHIN, Y. (2003): Testing for Unit Roots in Heterogeneous Pan-els. Journal of Econometrics, 115, No. 1, pp. 53 – 74.

IMF (2017): IMF Data: Direction of Trade Statistics. Washington, DC: IMF.

JLASSI, K. (2015): Modelling and Forecasting of Tunisian Current Account: Aggregate versus Disaggregate Approach. [GIIDS Working Paper, No. 13/2015.] Geneva: Graduate Institute of International and Development Studies. 47 pp.

KAO, CH. – CHIANG, M-H. (2001): On the Estimation and Inference of a Cointegrated Regres-sion in Panel Data. In: BALTAGI, B. H., FOMBY, T. B. and HILL, R. C. (ed.): Nonstationary Panels, Panel Cointegration and Dynamic Panels, Vol. 15, pp. 179 – 222.

KANG, J.S. - SHAMBAUGH, J.C. (2013) The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics: Many Paths to the Same Endpoint, [IMF Working Paper, No. 169/2013], Washington D.C., International Monetary Fund, 22 p.

KOSTOSKA, O. – PETRESKI, G. (2009): Modelling the Determinants of Exports and Imports: Assessment of the Macedonian Competitive Performances. Management and Marketing-Craiova, 7, No. 2, pp. 36 – 58.

LANE, P. - MILESI-FERRETTI, G.M. (2002) External Wealth, the Trade Balance, and the Real Exchange Rate, European Economic Review, 46, No. 6, pp. 1049 - 1071

LAVOIE, M. (2015). The Eurozone: Similarities to and Differences From Keynes’s Plan. Interna-tional Journal of Political Economy, 44, No. 1, pp. 57 - 160

LEMOINE, F. – ÜNAL-KESENCI, D. (2003): Trade and Technology Transfers: A Comparative Study of Turkey, India and China. [CEPII Working Paper, No. 16.] Paris: Le Centre d’études prospectives et d’informations internationales. 50 pp.

MCCOSKEY, S. – KAO, CH. (1998): A Residual-Based Test of the Null of Cointegration in Panel Data. Econometric Reviews, 17, No. 1, pp. 57 – 84.

MERVAR, A. (1994): Estimates of the Traditional Export and Import Demand Functions in the Case of Croatia. Croatian Economic Survey, No. 1, pp. 79 – 93.

MIRDALA, R. (2015): Real Exchange Rates, Current Accounts and Competitiveness Issues in the Euro Area. Journal of Applied Economic Sciences, 10, No. 7, pp. 1096 – 1128.

MIRDALA, R. – RUŠČÁKOVÁ, A. (2015): On Origins and Implications of the Sovereign Debt Crisis in the Euro Area. Journal of Advanced Studies in Finance, 6, No. 2, pp. 87 – 102.

MIROUDOT, S. – LANZ, R. – RAGOUSSIS, A. (2009): Trade in Intermediate Goods and Ser-vices. [OECD Trade Policy Papers, No. 93.] Paris: OECD. 66 pp.

NARAYAN, P.K. – NARAYAN, S. (2010): Carbon Dioxide Emissions and Economic Growth: Panel Data Evidence from Developing Countries. Energy Policy 2010, 38, No. 1, pp. 661 – 666.

PHILLIPS, P. C. B. – HANSEN, B. E. (1990): Statistical Inference in Instrumental Variables Pro-cess. Review of Economic Studies, 57, No. 1, pp. 473 – 495.

PESARAN, M. H. – SHIN, Y. – SMITH, R. (1997): Estimating Long-run Relationships in Dynam-ic Heterogeneous Panel. [DAE Working Papers Amalgamated Series, No. 9721.] Cambridge, UK: Cambridge University Press. 25 pp.

PESARAN, M. H. – SHIN, Y. – SMITH, R. P. (1999): Pooled Mean Group Estimation of Dynam-ic Heterogeneous Panels. Journal of the American Statistical Association, 94, No. 446, pp. 621 – 634.

PESARAN, M. H. – SMITH, R. (1995): Estimating Long-run Relationships from Dynamic Hetero-geneous Panels. Journal of Econometrics, 68, No. 1, pp. 79 – 113.

PISANI-FERRY, J. (2012): The Euro Crisis and the New Impossible Trinity. Bruegel Policy Con-tributions, 1, January, pp. 2 – 16.

SANCHEZ, J.L.D. - VAROUDAKIS, A. (2013) Growth and Competitiveness as Factors of Euro-zone External Imbalances. Evidence and Policy Implications, [WB Policy Research Working Pa-per, No. 6732/2013], Washington D.C., World Bank, 50 p.

SAWYER, W. Ch. – SPRINKLE, R. L. (1996): The Demand for Imports and Exports in the US: A Survey. Journal of Economics and Finance, 20, No. 1, pp. 147 – 178.

SINN, H.W. - WOLLMERSHÄUER. T. (2012). Target 2 Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility. International Tax and Public Finance, 19, No. 4, pp. 468 - 508

STERN, R. M. – FRANCIS, J. – SCHUMACHER, B. (1976): Elasticities in International Trade: An Annotated Bibliography. London: Palgrave Macmillan UK. ISBN 978-1-349-03137-5.

STIRBÖCK, C. (2006): How Strong is the Impact of Exports and Other Demand Components on German Import Demand? : Evidence from Euro-area and Non-euro-area Imports, [DB Discus-sion Paper, No. 39], Frankfurt am Main, Deutsche Bundesbank, 48 p.

STOCK, J. H. – WATSON, M. W. (1993): A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems. Econometrica, 61, No. 4, pp. 783 – 820.

UNITED NATIONS (2010): International Trade After the Economic Crisis: Challenges and New Opportunities. [United Nations Publication, No. 2010/2.] Geneva: United Nations. 142 pp.

WEEKS, J. (2014). Euro Crises and Euro Scams: Trade not Debt and Deficits Tell the Tale. Review of Political Economy, 26, No. 2, pp. 171 - 189

WIERTS, P. – van KERKHOFF H. – de HAAN, J. (2014): Composition of Exports and Export Performance of Eurozone Countries. Journal of Common Market Studies, 52, No. 4, pp. 928 – 941.

WYPLOSZ, CH. (2013): Europe’s Quest for Fiscal Discipline. [European Economy Economic Papers, No. 498.] Luxembourg: European Communities. 47 pp.