THE ROLE OF PRODUCT VARIETY AND QUALITY AND OF DOMESTIC SUPPLY IN FOREIGN TRADE
Panayiotis P. Athanasoglou
Bank of Greece
The study examines the behaviour of imports of goods in the Greek economy during the last five decades and their determinants, with an emphasis on consumer’s preferences for “variety and quality” of the imported goods as well as on the demand and supply conditions of these goods in the domestic market. The estimated equations provide strong evidence for the importance of these two factors for import demand, and also explain significantly the stylized facts as well as long- and short-term movements in trade.
JEL classification: F14, F41, E21, C22
Keywords: effective demand for imports, New Trade Theory, product variety and quality.
Acknowledgements: The author would like to thank Ioannis Papadakis and George Oikonomou for their useful comments, as well as George Karadimas and Paris Mavrogenis for their contribution in the equation system estimation process. Thanks are also due to participants in the Bank of Greece Workshop for their helpful suggestions, and to Maria Toulia and Irene Gougoulia for the collection and processing of the statistical data. The views expressed in the paper are of the authors and do not necessarily reflect those of the Bank of Greece.
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