Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The refereeing process of this paper has been coordinated by Editorial Board of the ECB Working Paper Series, led by Philipp Hartmann. Terms of use: Documents in EconStor mayThe paper is released in order to make the research of CompNet generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB, the ESCB, and of other organisations associated with the Network. AcknowledgementsThe authors would like to thank Carlos Robalo Marques, Luca Opromolla and Maximiano Pinheiro for comments and suggestions. The authors would also like to thank participants in the Competitiveness Research Network meeting held at the European Central Bank in December 2012 and Banco de Portugal seminar, where a preliminary version of the paper was presented. The analysis, opinions and findings of this paper represent the views of the authors, which are not necessarily those of the Banco de Portugal. Paulo Soares EstevesBanco de Portugal; e-mail: pmesteves@bportugal.pt António RuaBanco de Portugal; e-mail: antonio.rua@bportugal.pt AbstractTraditionally, exports behavior is modeled only as a function of the foreign demand and the real exchange rate. However, it is by now widely acknowledged that these variables are not able to fully explain exports developments. This paper suggests considering domestic demand pressure as an additional variable, revisiting its economic rationale and assessing its empirical importance. In particular, we consider the Portuguese case and find that domestic demand developments are relevant for the short-run dynamics of exports. Moreover, it is found that this relationship is asymmetric, being stronger and more significant when domestic demand is falling than when it is increasing.Keywords: Exports; Domestic Demand Pressure; Error Correction Models; Asymmetry.JEL classification: C22, C50, F10.1 Non-Technical SummaryTraditionally, exports behavior is modeled only as a function of the foreign demand and the real exchange rate, i.e. considering demand factors. However, it is by now widely acknowledged that traditional variables are not able to fully explain exports developments.Assuming some substitutability between foreign and domestic sales, this paper suggests domestic demand pressure as an additional explanatory variable. Domestic conditions can influence firms willingness or ability to supply exports ...

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The paper is released in order to make the research of CompNet generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB, the ESCB, and of other organisations associated with the Network. Terms of use: Documents in AcknowledgementsThe authors would like to thank the participants in the Competitiveness Research Network meeting held at the European Central Bank in July 2014, where a preliminary version of the paper was presented, and an anonymous referee. Elena BobeicaEuropean Central Bank; e-mail: elena.bobeica@ecb.int Paulo Soares EstevesBanco de Portugal; e-mail: pmesteves@bportugal.pt António RuaBanco de Portugal, Universidade Nova de Lisboa; e-mail: antonio.rua@bportugal.pt Karsten StaehrTallinn University of Technology, Eesti Pank; e-mail: karsten.staehr@eestipank.ee Abstract The paper investigates the link between domestic demand pressure and exports by considering an error correction dynamic panel model for eleven euro area countries over the last two decades. The results suggest that there is a statistically significant substitution effect between domestic and foreign sales. Furthermore, this relationship appears to be asymmetric, as the link is much stronger when domestic demand falls than when it increases. Weakness in the domestic market translates into increased efforts to serve markets abroad, but, conversely, during times of boom, exports are not negatively affected by increasing domestic sales. This reorientation towards foreign markets was particularly important during the crisis period, and thus could represent a new adjustment channel to strong negative domestic shocks. The results have important policy implications, as this substitution effect between domestic and external markets might allow the euro area countries under stress to improve their trade outcomes with a relatively small downward pressure on domestic prices.

In macroeconomic forecasting, in spite of its important role in price and activity developments, oil prices are usually taken as an exogenous variable, for which assumptions have to be made. This paper evaluates the forecasting performance of futures market prices against the other popular technical procedure, the carry-over assumption. The results suggest that there is almost no difference between opting for futures market prices or using the carry-over assumption for short-term forecasting horizons (up to 12 months), while, for longer-term horizons, they favour the use of futures market prices. However, as futures market prices reflect market expectations for world economic activity, futures oil prices should be adjusted whenever market expectations for world economic growth are different to the values underlying the macroeconomic scenarios, in order to fully ensure the internal consistency of those scenarios.

D Do oe es s d do om me es st ti ic c d de em ma an nd d m ma at tt te er r f fo or r f fi ir rm ms s' ' e ex xp po or rt ts s? ?" " P Pa au ul lo o S So oa ar re es s E Es st te ev ve es s M Mi ig gu ue el l P Po or rt te el la a A An nt tó ón ni io o R Ru ua a NIPE WP 18/ 2018 " "D Do oe es s d do om me es st ti ic c d de em ma an nd d m ma at tt te er r f fo or r f fi ir rm ms s' ' e ex xp po or rt ts s? ?" " P Pa au ul lo o S So oa ar re es s E Es st te ev ve es s M Mi ig gu ue el l P Po or rt te el la a A An nt tó ón ni io o R Ru ua a N NI IP PE E *

How should we forecast GDP? Should we forecast directly the overall GDP or aggregate the forecasts for each of its components using some level of disaggregation? The search for the answer continues to motivate several horse races between these two approaches. Nevertheless, independently of the results, institutions producing shortterm forecasts usually opt for a bottom-up approach. This paper uses an application for the euro area to show that the option between direct and bottom-up approaches as the level of disaggregation chosen by forecasters is not determined by the results of those races.