Viewing 16 posts categorized under Trade

Spending a windfall

March 15, 2024

Two shocks hit the world during the 1500s: a technological shock and a monetary shock. The technological shock was the decrease in trading costs obtained with new sea routes between Europe and Asia. The monetary shock was the discovery of gold and silver in America. Portugal had a prominent participation in these events. The difficulty is to isolate the effects of the precious metals from the effects of the sea routes.

Exports response to changes in credit conditions

January 26, 2024

Exports represent one fourth of Portuguese GDP and are largely responsible for the economic recovery following the sovereign debt crisis. However, exports and exporters are also fragile as they display a strong dependence on bank credit. This paper studies the impact of an increase in the cost of credit for exporters. This increase is driven by a change in banking regulation (Basel III) which makes giving credit to exporters who sell in high-risk destinations more expensive for banks.

Multinationals and services imports from havens: when policies stand in the way of tax planning

March 16, 2023

Multinational groups have been in the spotlight because of their activities that shift profits to tax havens, allowing them to minimize corporate tax bills in high-tax countries. The literature has documented several strategies used by multinationals to shift profits. This paper studies one strategy for which systematic empirical evidence is relatively scarce: the use of intra-group services transactions. Under this route, the firms of the group located in high-tax countries may artificially inflate their costs by paying expensive fees for services (e.

Firm adaptation to the COVID-19 crisis

February 22, 2023

The COVID-19 crisis triggered a multitude of economic effects. At the microeconomic level, they varied across economic agents, notably firms, with some showing greater resilience than others, depending on intrinsic characteristics such as size and participation in international trade. Zooming in on firm size, the crisis was deeply felt by smaller firms. As for participation in international trade, stronger connections abroad increased firms’ exposure to global adverse shocks, while providing a broader scope for resilience-enhancing decisions about production and market management.

Surpluses in technology balance of payments and international competitiveness

August 17, 2021

Technology Balance of Payments (TBP) records the international trade flows of intangibles, namely money flows paid or received for the use of patents, licenses, knowledge, brands, models, designs, industrial research and development (R&D), and technical services, including technical assistance. Thus, the balance of the TBP reflects the ability of a country to sell/ acquire technologies from abroad. Does a TBP surplus determine the international competitiveness of a country. Such a surplus may increase with a country’s high degree of technological autonomy and a low level of technology imports.

Indebtedness in export-led SMEs

May 17, 2021

This study finds that Portuguese small and medium enterprises (SME) with a higher degree of export intensity rely more on internal funds. This finding arises from examining the determinants of corporate leverage on a sample of 7,676 Portuguese SMEs and by focusing on the impact of export intensity on firms’ capital structure. In addition, the analysis reveals that more profitable SMEs and those with more asset tangibility and business risk have lower debt ratios, but that SMEs with larger growth opportunities (measured either by sales growth or the ratio between CAPEX and total assets) are more levered.

Worker reallocation and firm innovation

April 24, 2021

The extraordinary increase of Chinese exports over the past two decades has represented a new source of competitive pressure for European firms. In this context, innovation and investments in knowledge are considered as a protection against import competition from low-wage countries. Given that wage differences are large and take time to respond, competing on costs is not always a feasible option. This paper examines whether firms in Denmark and Portugal escape import competition through innovation by either internally reallocating their non-R&D workers to R&D jobs, hiring new workers for R&D activities, or doing both.

Export-led growth in Portugal after the COVID-19 pandemic

December 8, 2020

The COVID-19 pandemic has led to a significant decline in demand in Portugal and elsewhere in the world. In Portugal, private consumption is projected to fall by 8% in 2020 and investment spending by 11%. Furthermore, private consumption growth over the long-run is likely to remain low due to ageing demographics of the Portuguese society: its old-age dependency ratio is at 40%, already 10% higher than the OECD average. Where then might an increase in aggregate demand come from?

Does foreign presence induce host country firms’ exit? The case of Portugal

November 1, 2019

Multinational enterprises are a significant contributor to the world economy as evidenced by indicators of foreign affiliate activity such as sales, employment, exports, value added and assets. This paper studies their role as agents of competition using the Portuguese economy. Multinational activities might affect the host country industry dynamics due two main opposing effects. On one hand, the presence of foreign firms may induce less efficient domestic firms to exit the market (a crowding-out effect) through, for example, aggressive business practices of foreign firms (e.

The China shock and employment in Portuguese firms

September 30, 2019

China’s rise as an export powerhouse has impacted labor markets across the Western world – but the effects appear to differ dramatically across countries. We evaluate the impact of rising Chinese exports on employment in Portuguese manufacturing industries by looking at both direct competition in the Portuguese market and indirect competition in Portugal’s largest export markets in Western Europe (Germany, Spain, Italy, France , and the UK). In addition, we explore how Portugal’s stringent labor market regulations might have shaped those responses.

Migrant networks and the export performance of Portuguese firms

February 20, 2019

Fixed costs associated with learning about demand and setting up distribution networks are expected to be lower when there are more potential contacts in the destination market, suggesting a greater probability of market entry and larger export revenues. This paper matches historically-determined emigration stocks with detailed firm-level data from Portugal to examine the effect of migrant networks on export outcomes. Portugal offers unique historical features for this analysis. First, the motives and timing of the sizable emigration flows observed in the country during the _Estado Novo _authoritarian regime, along with their steep fall in the aftermath of the democratic revolution of 1974, alleviate concerns of reverse causality.

Successful exporters learn about external demand and deliver on product quality

February 20, 2019

How and why firms become successful exporters? To answer this question, the paper examines the joint evolution of export revenue, and input and output prices over the firm’s life cycle. Using detailed micro data from the Portuguese manufacturing sector, the paper finds that export revenue tends to rise with experience in export destinations, and that successful firms that export for longer periods to a destination tend to ship larger quantities at lower prices to that market, while using more expensive inputs.

The effect of competition by Chinese exports in international markets on the Portuguese labour market

February 19, 2019

Chinese exports may affect a given country directly through intensifying competition in the domestic market, but also indirectly in foreign markets where firms from that country compete with Chinese exports. In fact, the large export market share gains of China in low-tech, low-skill products, like textiles, clothing, footwear, and electric appliances, were accompanied by losses in the export shares of several other countries, like Portugal. These indirect effects of competition in third-country export markets are the main object of this study; they can be significant given the growing sophistication of China’s exports, implying greater competition in virtually all industries in which developed economies operate.

Exchange rate shocks with the Brexit referendum and Portuguese exports

November 22, 2018

Understanding the effect of exchange rate movements on international trade is a major issue for economists and for policy-makers. Using a quasi-natural experimental evidence on the effects of exchange rate shocks on export prices, quantities and export participation, the paper examines the consequences of the large, sudden and unanticipated plunge in the British pound following the Brexit referendum. As figure 1 shows, the pound depreciated sharply against the Euro after the referendum and it has stayed more or less at that level since.

Debt financing and internationalization of Portuguese SMEs

June 4, 2018

This paper examines the relationship between the capital structure of Portuguese small and medium enterprises (SMEs) and their export performance. The Portuguese industrial firms are of great importance for the domestic economy and played a significant role in the country’s economic recovery amid the recessionary environment of the last decade. Being smaller and privately owned, and thus with less publicly available information, SMEs tend to face greater agency and asymmetric information problems that impact investment and performance generally, and export performance more specifically.

Portuguese external imbalances: driven by demand rather than price competitiveness

July 25, 2016

Large current account deficits in European economies, among them Portugal, have been a decisive feature of the European banking and sovereign debt crisis. While the Portuguese current account has undergone a severe adjustment, the level of external debt remains among the highest in Europe and reducing it down to the threshold defined by the EU-Commission’s Macroeconomic Imbalance Procedure is likely to take decades. Research relates the external imbalances occurring in the run-up to the crisis to a number of factors.