The role of non-price determinants for export demand / Florian Verheyen

Abstract:
This investigation includes non-price factors such as patent applications and government and business characteristics into macroeconomic export demand functions because these determinants might also be relevant for international competitiveness. Results from panel cointegration as well as dynamic panel models for a sample of up to 27 countries from 1980–2011 show that conventional factors like the real effective exchange rate or foreign demand are important determinants of export demand. However, neglecting non-price factors such as patents which proxy innovativeness of a country or political stability which represents a solid business environment also affect export demand significantly positive. Thus, from a policy point of view, the focus on the exchange rate in order to remain competitive in international trade seems to be a too narrow perspective. Instead, politicians should also take care of these supply side factors if their focus is to increase a country’s export competitiveness.

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