Back on track? A macro-micro narrative of Italian exports

Transcription

1 Back on track? A macro-micro narrative of Italian exports M. Bugamelli, S. Fabiani, S. Federico, A. Felettigh, C. Giordano, A. Linarello (Banca d Italia) MEF, Dipartimento del Tesoro 21 settembre 2017

2 Motivation Italy France Germany Spain Exports of goods and services (constant prices) Italy France Germany Spain annual growth rate o Since the late 90s, disappointing performance, compared to other main EA countries o yet, since 2010 exports have grown on average ½ pp above foreign demand, market shares have stabilized, negative gap vs best-performer DE has narrowed significantly 2

3 Our contribution What are the factors behind Italy s comparatively weak export performance in ? How do we interpret the recent signs of recovery? Successful structural adjustment ( back on track ) or favourable cyclical/temporary factors? Macro narrative o Aggregate data, markets and sectors, firm distribution by size o Determinants: external demand, price competitiveness, new competitors (China), non-price competitiveness, domestic demand panel (country- sector) regressions Micro narrative o Micro heterogeneity affects aggregate outcomes o Analysis of data on the universe of Italian exporting firms firm-level regressions 3

4 Preview of results o REER appreciation (nominal exchange rate and relative prices) o Sectoral specialization: large exposure to competition from China o Export distribution relatively more skewed towards small firms After 2010 o REER depreciation (cyclical/temporary?) o Sectoral specialization: increasing weight of sectors with lower exposure to competition from China (automotive, pharmaceuticals, food products) o Recomposition of exports versus medium-large firms 4

5 A Macro narrative 5

6 A Macro narrative The facts Standard determinants Additional factors 6

7 Export performance: the numbers Focus on exports of goods ( 80% of Italy s exports of goods and services) EXPORTS OF GOODS Italy France Germany Spain annual growth rate at current prices o Italy: large negative growth differential ( 3/3.5 pp) vs DE and ES (but positive vs FR) o Since 2010, negative differential vs DE shrinks ( 1 pp) 7

8 Market shares on world trade Goods exports market shares in world imports (percentage shares; percentage points in lower panel) (a) at 2005 prices and exchange rates (b) at current prices and exchange rates Italy France Germany Spain Italy France Germany Spain % change abs. change Italy: after large decrease since 1999, stable market share since

9 Statistical issues matter: deflators and GDPX Comparing export deflators Exports of goods: Deflators NA PPIX difference (A) (B) (A) - (B) annual growth rate: Italy France Germany Spain Systematic differences between export deflators in NA and export prices (PPIX) IT export performance relative to FR, DE, ES might be underestimated at constant prices Gross exports versus domestic value added embodied in exports (average growth rate; exports of goods at current prices) Italy France Germany Spain Gross exports (GX) Domestic value added embodied in exports (GDPX) Gap between IT and DE/ES becomes smaller if measured in terms of GDPX ES: since 2010 export growth inflated by increasing share of foreign value added in X 9

10 Geography and sectors [1] Negative growth differential vis-à-vis Germany: Destination markets o : largely due to euro-area markets o : narrower differential mainly thanks to more favourable developments in euro-area and some extra-eu markets (United States); Germany maintains its advantage in Central and Eastern Europe figure Sectors o : negative growth gap in almost all main sectors o : narrower differential due to widespread improvement in relative performance; net of motor vehicles and other transport equipment, Italian exports grew almost at a par with Germany figure 10

11 Geography and sectors [2] Italy vis-à-vis France: o Italy s advantage quite balanced, only slightly larger on extra-eu markets relative to EU destinations figure o Faster export growth in almost all main sectors (few exceptions: aeronautics, luxury products) figure Italy vis-à-vis Spain: o Worse performance especially in extra-eu markets, but the main contribution to the negative growth gap comes from intra-eu trade o Main contribution to under-performance from just a few sectors: automotive, food products, chemicals, wearing apparel 11

12 Firms [1] Number of exporters (indices 1999=100) Contribution to changes in total exports (percentage points) o Micro-exporters: growing number, losing ground o Shift in the composition of exports by firm size figure 12

13 Firms [2] Goods export growth: intensive and extensive margins in Italy (average yearly percentage changes and contributions) Average Intensive Extensive of which: export growth margin margin entry exit o Intensive margin drives aggregate export growth 13

14 A Macro narrative Standard determinants Additional factors 14

15 External (potential) demand [1] Goods exports and potential demand (volumes) (average yearly growth rates) Italy France Germany Spain Exports Pot. demand Exports Pot. demand Exports Pot. demand Exports Pot. demand o Potential demand: weighted average of destination countries imports o Growth in potential demand largely similar across countries (except for slower growth in ES in ) figure o Since 2010: exports faster than potential demand in all countries ( 0.5 pp in IT and FR, 1.5 pp in DE, 2 pp in ES) 15

16 External (potential) demand [2] Italy s goods exports and potential demand by market (average yearly growth rates; volumes) TOTAL EXPORTS POTENTIAL DEMAND INTRA AREA EXPORTS INTRA AREA POTENTIAL DEMAND EXTRA AREA EXPORTS EXTRA AREA POTENTIAL DEMAND : Italy s goods exports have grown less than potential demand both in EA and extra-ea markets : Italy s exports have grown faster than potential demand in extra-ea markets, slightly less than potential demand in EA markets 16

17 Price competitiveness 115 Real effective exchange rates (1999=100; PPI-deflated) Nominal effective exchange rates Italy France Germany Spain Italy France Germany Spain Relative prices (ratio of country s prices to partners prices) PPI-based REER: loss of about 4 p.p. for IT (2 for FR, 10 for ES, slight gain for DE) Recovery since due to NEER and relative prices (IT and FR) Italy France Germany Spain

18 Constant market share analysis Constant-market-share decomposition of percentage changes in export market shares between 1999 and 2015 (as a percentage of market shares in 1999; exports at current prices) Italy: constant-market-share decomposition of absolute changes in export market shares (percentage points; exports at current prices) Sectoral specialization Geographical specialization Structure interaction Adaptation Competitiveness Change in market share Italy France Germany Spain Sectoral specialization Geographical specialization Structure interaction Adaptation Competitiveness Change in market share o Sectoral and geographical specialization explains only a small part of Italy s loss in market share over o Stability of Italy s market share since 2010 benefited from sectoral specialization figure macro 18

19 A Macro narrative Additional factors 19

20 Competition from China a) Percentage change in market shares : High competition from China Medium competition from China Low competition from China Total Italy France Germany Spain b) Percentage composition of exports Italy France Germany Spain Italy France Germany Spain High competition from China Medium competition from China Low competition from China o Products characterized by high competition from China recorded a larger decline in market share o Italy more exposed to the China shock than the other three countries figure o The China shock accounts for at least one tenth of Italy s export underperformance vs DE and ES ( omitted variable : firm distribution by size) 20

21 Non-price competitiveness: quality [1] o We apply Khandelwal et al. (2013) to CEPII-BACI data: assume augmented CES demand function with quality parameter λ (demand shifter): σ from Soderbery (2015) yield an estimable equation: use the error term to compute quality parameter: 21

22 Non-price competitiveness: quality [2]

23 Domestic demand Correlation between exports and domestic demand: negative or positive depending on the channel: o risk diversification (-) capacity utilization (-) o credit constraints (+) Aggregate data o Negative correlation: Esteves-Rua (2013) for Portugal, Bobeica et al. (2016) on panel of EA countries ( ) o No correlation: Giordano-Zollino (2016) for Italy ( ) Firm-level data o Negative correlation: Vannoorenberghe (2012) for France, Banco de Espana (2017) for Spain o Time-varying correlation: Bugamelli, Gaiotti and Viviano (2015) for Italy: negative before 2008 (capacity) and positive in (credit)

24 Bridging the micro and the macro 24

25 Bridging the micro and the macro: Country-sector panel regressions 25

26 Panel regressions: empirical specification exp i, j, t a 0 a REER 1 i, j, t a 2 potdem i, j, t c i i, t o all variables in logs o exp i,j is the current-value exports of goods of country i in sector j (source: CEPII-BACI) o REER i,j is the real effective exchange rate of country i and sector j (source: Sato et al., 2015) o potdem i,j is potential demand of goods that country i-sector j faces (source: CEPII-BACI) o c i : country fixed effects; according to the specification, sector and year fixed effects are also included o Years: Countries: IT, FR, DE, ES - Sectors: 12 manufacturing sectors (ATECO2002) o OLS with robust standard errors (also clustering by country-sector)

27 Panel regressions: standard determinants (1) (2) (3) (4) (5) ΔREER(t-1) *** *** (0.05) (0.05) (0.09) (0.11) (0.10) ΔREER(t-1)*Spai n dummy *** ** (0.19) (0.17) ΔREER(t-1)*France dummy (0.12) (0.13) ΔREER(t-1)*Italy dummy (0.12) (0.12) ΔPotdem(t) 0.928*** 0.927*** 0.884*** 0.892*** 0.903*** (0.02) (0.03) (0.03) (0.04) (0.04) ΔPotdem(t)*Spai n dummy (0.04) (0.04) ΔPotdem(t)*France dummy * (0.05) (0.05) ΔPotdem(t)*Italy dummy 0.079** 0.062* (0.03) (0.03) Spai n dummy (0.00) (0.00) (0.00) (0.00) (0.01) France dummy *** *** *** *** *** (0.00) (0.00) (0.00) (0.00) (0.01) Italy dummy *** *** *** *** *** (0.00) (0.00) (0.00) (0.00) (0.00) Pos t-2010 dummy*spai n dummy 0.018** (0.01) Pos t-2010 dummy*france dummy 0.012* (0.01) Pos t-2010 dummy*ital y dummy 0.016*** (0.01) Year fi xed effects NO NO YES YES YES Sector fi xed effects NO YES YES YES YES Adjusted R-squared N

28 Panel regressions: additional determinants (1) (2) (3) (4) (5) (6) (7) (8) ΔREER(t-1) *** *** *** *** (0.05) (0.05) (0.05) (0.05) (0.09) (0.08) (0.10) (0.10) ΔPotdem(t) 0.928*** 0.900*** 0.899*** 0.890*** 0.883*** 0.851*** 0.826*** 0.818*** (0.02) (0.02) (0.02) (0.02) (0.03) (0.03) (0.03) (0.03) CompChina(t) ** (0.01) (0.01) (0.02) (0.02) (0.06) (0.06) (0.07) (0.07) ΔQuality(t) 0.147*** 0.156*** 0.157*** 0.249*** 0.253*** 0.254*** (0.02) (0.02) (0.02) (0.05) (0.06) (0.06) Share (0.01) (0.01) (0.03) (0.03) Caputil(t-1) ** ** (0.00) (0.00) Finconstr(t) ** (0.00) (0.00) Spain dummy * (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.01) (0.01) France dummy *** *** *** *** *** *** *** *** (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) Italy dummy *** *** ** *** *** (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.01) (0.01) Year fixed effects NO NO NO NO YES YES YES YES Sector fixed effects NO NO NO NO YES YES YES YES Adjusted R-squared N

29 Bridging the micro and the macro Firm-level panel regressions 29

30 Firm-level regressions: empirical specification Data on the universe of Italian exporters (Istat) between 2000 and 2014 exp i, t a 0 a Potdem 1 i, t a 2 reer i, t 1 a 3 Chinashare i, t 1 X i, t 1 jt i, t o Potential demand: growth rate of imports in product-destination markets Potdem it = ω ipd0 ( IMP pdt ) p,d o Firm-specific real exchange rate rer d,t = e d,t PPI t ITA PPI t d reer i,t = ω id0 rer d,t d o China s share in world exports in firm product-mix Chinashare it = ω p0 (Chinashare pt ) p P i0 30

31 Firm-level regressions: results Firm-level export growth: estimation results (dep. var.: firm-level log-differences of goods exports; estimation period: ) ( 1 ) ( 2) (3) (4) (5) (6) (7) (8) (9) more than potdem(t) *** *** 0.174*** *** * *** *** *** *** [0.0342] [0.0344] [0.0253] [0.0429] [0.0866] [0.0178] [0.0291] [0.0321] [0.0693] reer(t-1) * *** [0.0531] [0.0523] [0.0775] [0.0552] [0.161] [0.0456] [0.0693] [0.0514] [0.0961] Chinashare(t-1) ** ** ** *** ** [0.0298] [0.0319] [0.0327] [0.0503] [0.0591] [0.0340] [0.0225] [0.0267] [0.0593] Industry-time FE YES YES YES YES Firm controls NO YES R Observations YES YES

32 Conclusions on Italy o REER appreciation (nominal eff. exchange rate and relative prices) o Sectoral specialization: large exposure to competition from China o Exports relatively more skewed towards small firms After 2010 o REER depreciation (cyclical/temporary?) o Weak domestic demand with credit constraints (temporary) o Sectoral specialization: increasing weight of sectors with lower exposure to competition from China (automotive, pharmaceuticals, food products) o Recomposition of exports versus medium-large firms 32

33 What about Spain and France? Spain Mix of factors behind its over-performance o good product specialization (low exposure to China shock, motor vehicles) o extensive margin (i.e. entering new markets) catching-up process o stronger FDI inflows o exports since 2010 inflated by growing share of foreign value added.despite loss of price competitiveness + bad geographical specialization France Broadly-based under-performance o with some exceptions (luxury products, aeronautical sector) o despite good product specialization (very low exposure to China) o despite gains in price competitiveness o stronger FDI outflows o exports partly inflated by deflators ( ) and merchanting flows ( ) 33

34 Thank you for your attention 34

35 Supplementary material 35

36 Export performance: goods and services GOODS AND SERVICES GOODS SERVICES Italy France Germany Spain Italy France Germany Spain Italy France Germany Spain annual growth rate at constant prices annual growth rate at constant prices annual growth rate at constant prices annual growth rate at current prices annual growth rate at current prices annual growth rate at current prices market shares in world imports at constant prices and exchange rates share of goods in total exports share of services in total exports % change abs. change

37 Exports of goods by destination markets Exports of goods across destination markets (current prices; average yearly percentage changes) ITALY FRANCE GERMANY SPAIN annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight European Union Euro area Germany Spain France Italy Non-euro area UK Eastern Europe Extra European Union Switzerland China Japan Russia Turkey USA TOTAL Source: authors calculations on Eurostat and national sources (IMTS) data. 37

38 Exports of goods by destination markets The contribution of destination markets to the annual export growth differential between Italy and the other main EA countries (percentage points) a) b) EU EU Euro area Euro area of which: other 3 (1) Non-euro area EU of which: UK of which: Eastern Europe FRANCE GERMANY SPAIN FRANCE GERMANY SPAIN of which: other 3 (1) Non-euro area EU of which: UK of which: Eastern European Extra EU Extra EU of which: China of which: China of which: Russia of which: Russia of which: USA of which: USA of which: Switzerland of which: Switzerland TOTAL TOTAL -3,5-3,0-2,5-2,0-1,5-1,0-0,5 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 Source: authors calculations on Eurostat and national sources (IMTS) data. -3,5-3,0-2,5-2,0-1,5-1,0-0,5 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 38

39 Exports of goods by sector [1] Exports of goods across sectors (current prices; average yearly percentage changes) ITALY FRANCE GERMANY SPAIN annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight annual growth initial weight Agriculture, food, beverages Textiles Wearing apparel Leather and related prod Refined petroleum prod Chemical prod Pharmaceutical prod Rubber, plastic, non-metallic min. prod Metals and metal prod Computer, electronic and optical Electrical equipment Machinery and equipment Motor vehicles Other transport equip Unallocated goods + other goods TOTAL Source: authors calculations on Eurostat and national sources (IMTS) data. 39

40 Exports of goods by sector [2] The contribution of sectors to the annual export growth differential between Italy and the other main EA countries (percentage points) a) b) Agriculture, food, beverages Agriculture, food, beverages Textiles Wearing apparel Leather and related prod. Refined petroleum prod. FRANCE GERMANY SPAIN FRANCE GERMANY SPAIN Textiles Wearing apparel Leather and related prod. Refined petroleum prod. Chemical prod. Chemical prod. Pharmaceutical prod. Pharmaceutical prod. Rubber, plastic, non-metallic min. prod. Rubber, plastic, non-metallic min. prod. Metals and metal prod. Metals and metal prod. Computer, electronic and optical Computer, electronic and optical Electrical equipment Electrical equipment Machinery and equipment Machinery and equipment Motor vehicles Motor vehicles Other transport equip. Other transport equip. Other goods (1) Other goods (1) TOTAL TOTAL Source: authors calculations on Eurostat and national sources (IMTS) data

41 Market share by firm size Export market shares in world imports (percentage shares) 1,8 1,6 1,4-29% 1,2 1,0-28% 0,8 0,6 0,4 0,2-51% -45% and more 41

42 Potential demand Potential demand at constant prices (indices 1999=100) Italy France Germany Spain

43 A standard macro equation for Italy s exports Export growth decomposition: Italy (percentage points; non-food and non-energy goods exports) Potential demand Price competitiveness, nominal effective exchange rate Price competitiveness, relative prices Residual component Growth rate of NFNE goods exports o Impact of price competitiveness on Italy s exports: large drag in , small push since 2010 o Caveats on the macro approach 43

44 Competition from China Export similarity (index) Italy Germany France Spain

45 "Extensive margin" relevant only for Spain (1) Over-performance of exports with respect to the intensive margin: the role of the extensive margin (current prices and exchange rates; indices 1999=100) Italy France Germany Spain

46 "Extensive margin" relevant only for Spain (2) Number of markets (product-country pairs) reached by each country, as a % of markets reached by at least one of them ITA FRA DEU ESP