Janssen, Ρ. (2014) “DG ECFIN And The Missing Greek Exports“, Social Europe Journal, 02 July.
Economists at DG ECFIN are starting to notice something we have pointed out already some time ago: Despite an enormous cut in wage costs, Greek exports have firmly stayed put in recessionary territory and hopes for an export-led recovery have proven to be illusive. Troubled by this failure of Greek exports to lift off, DG ECFIN economists do what economists do and that is to build an econometric model to find out what exactly is going wrong. The conclusions from their model are quite interesting.
A first conclusion is that the low export performance of Greece is not just a recent phenomenon but is already dating back a long time ago with the volume of missing exports being estimated at around 24% to 33% during the 1995 -2008 period. This dismal performance got further exacerbated under the adjustment program with Greek export performance deteriorating significantly and lagging behind the recovery in other programme countries and with the gap in export volumes having risen to 40.5% in 2009. Here, the paper puts the blame on policy uncertainty and the evaporation of trade credit, the latter resulting from the large outflows of deposits from the Greek banking system.
This also implies that the substantial correction of external imbalances that took place has everything to do with import demand collapsing because of the squeeze in domestic demand but has very little or nothing to do with exports increasing (see graph below).
Relevant posts:
- Böwer, U., Michou, V. & Ungerer, C. (2014) “European Economy: The Puzzle of the Missing Greek Exports“, Economic Papers 518, European Commission, June.
- Belke, Α., Oeking, Α. & Setzer, R. (2014) “Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries“, Economic Policy, CEPS Working Documents, 06 May.
- Alcidi, C. & Gros, D. (2012) “Why is the Greek economy collapsing? A simple tale of high multipliers and low exports“, The Centre for European Policy Studies, 21 December.