The Determinants of Exports Revisited: Lessons from the Recent Crisis

This paper aims at identifying the determinants of export activity of EU countries under conditions of economic crisis. Traditional variables (such as price competitiveness and external demand) are considered; however, new elements are also introduced, including the effect of shrinking domestic demand that motivates producers to target international markets and also the “value added” of the implemented structural reforms that may induce investment in export-oriented firms (by affecting the business environment). Due to these new elements, we focus our analysis onto EU countries that were affected more by the crisis or even had to appeal for ad-hoc external financing of their borrowing requirements (Ireland, Greece, Portugal and Spain). Our analysis is conducted using panel data covering selected EU countries for a period both prior and following the outbreak of the crisis. In this context, an explanation is offered for the rebound of Greek exports in the aftermath of the internal devaluation policy mix implemented since 2010. More generally, and based on the findings of the paper, an intuition is offered on whether and how exports could serve as a growth driver for the aforementioned countries while the overall effect of structural reforms on exports is evaluated accordingly.