Sluggish Exports in Advanced Economies: How Much Is Due to Demand?
Exports in advanced economies have been relatively sluggish since 2011, growing at a much slower pace than observed before the global financial crisis. In this paper, export-demand equations for a panel of 18 countries in the Organisation for Economic Co-operation and Development (OECD) are estimated in order to assess whether this sluggishness can be attributed to weak foreign demand. Over half of the slowdown in advanced-economy export growth since 2011 (relative to the pre-crisis trend) can be explained by weak global demand growth. More specifically, exports in advanced economies have been restrained by the weakness of global investment, a trade-intensive demand component and weak demand out of Europe, a region that accounts for about 40 per cent of the demand for advanced-economy exports. Weak foreign demand cannot explain all of the weakness in aggregate OECD exports since 2011, suggesting that other factors have also played a role.