Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/113781
Authors: 
Belke, Ansgar
Oeking, Anne
Setzer, Ralph
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5455
Abstract: 
We argue that, under certain conditions, firms consider exports as a substitute for domestic demand. Our econometric model for six euro area countries suggests domestic demand and capacity constraints as additional variables for export equations. We apply the exponential and logistic variant of a smooth transition regression model and find that domestic demand developments are relevant for short-run export dynamics particularly during more extreme stages of the business cycle. A substitutive relationship between domestic and foreign sales can most clearly be found for Spain, Portugal and Italy, providing evidence of the importance of sunk costs and hysteresis in international trade.
Subjects: 
domestic demand pressure
error-correction models
hysteresis
modelling techniques
smooth transition models
exports
sunk costs
JEL: 
F14
C22
C50
C51
F10
Document Type: 
Working Paper

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