The energy shock, price competitiveness and euro area export performance

This box provides empirical evidence on the role of the recent energy price shock in affecting price competitiveness and euro area export performance. At the aggregate level, an analysis based on a structural vector autoregression (SVAR) shows that the chief drivers of export dynamics in the past two years have been shifts in global demand conditions and the effects of supply bottlenecks. The energy supply shock has played a relatively minor role in dampening overall export growth, lowering it by about one percentage point on average over the past year. However, the energy shock may have played a greater role in more exposed sectors, as euro area exports have decreased strongly in high energy-intensive sectors over the past year. Indicators based on relative prices point to a loss of competitiveness for the euro area during 2022. The medium-term outlook for euro area competitiveness may deteriorate further on account of structural changes in energy costs because of the diversification of gas sources and the energy transition, which may lead to higher input costs for euro area exporters compared with their foreign competitors. JEL Classification: F1