Review of World Economics

, Volume 152, Issue 1, pp 107–125 | Cite as

Exports and domestic demand pressure: a dynamic panel data model for the euro area countries

  • Elena Bobeica
  • Paulo Soares Esteves
  • António RuaEmail author
  • Karsten Staehr
Original Paper


The paper investigates the link between domestic demand pressure and exports by considering an error correction dynamic panel model for eleven euro area countries over the last two decades. The results suggest that there is a statistically significant substitution effect between domestic and foreign sales. Furthermore, this relationship appears to be asymmetric, as the link is much stronger when domestic demand falls than when it increases. Weakness in the domestic market translates into increased efforts to serve markets abroad, but, conversely, during times of boom, exports are not negatively affected by increasing domestic sales. This reorientation towards foreign markets was particularly important during the crisis period, and thus could represent a new adjustment channel to strong negative domestic shocks. The results have important policy implications, as this substitution effect between domestic and external markets might allow the euro area countries under stress to improve their trade outcomes with a relatively small downward pressure on domestic prices.


Exports Domestic demand pressure Asymmetry 

JEL classification

C22 C50 F10 


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Copyright information

© Kiel Institute 2015

Authors and Affiliations

  • Elena Bobeica
    • 1
  • Paulo Soares Esteves
    • 2
  • António Rua
    • 3
    • 4
    Email author
  • Karsten Staehr
    • 5
  1. 1.European Central BankFrankfurtGermany
  2. 2.Office of the GovernorBanco de PortugalLisbonPortugal
  3. 3.Economics and Research DepartmentBanco de PortugalLisbonPortugal
  4. 4.Nova School of Business and EconomicsUniversidade Nova de LisboaLisbonPortugal
  5. 5.Eesti PankTallinn University of Technology TallinnEstonia

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