3/2016 Jaanika Meriküll et al. Export characteristics and output volatility: comparative firm-level evidence for CEE countries

Working Papers of Eesti Pank 3/2016

Urška Čede, Bogdan Chiriacescu, Péter Harasztosi, Tibor Lalinsky, Jaanika Meriküll. Export characteristics and output volatility: comparative firm-level evidence for CEE countries

The literature shows that openness to trade improves longterm growth but also that it may increase exposure to high output volatility. In this vein, our paper investigates whether exporting and export diversification at the firm level have an effect on the output volatility of firms. We use large representative firm-level databases from Estonia, Hungary, Romania, Slovakia and Slovenia over the last boom-bust cycle in 2004–2012. The results confirm that exporting is related to higher volatility at the firm level. There is also evidence that this effect increased during the Great Recession due to the large negative shocks in export markets. In contrast to the literature and empirical findings for large or advanced countries we do not find a statistically significant and consistent mitigating effect from export diversification in the Central and Eastern European countries. In addition, exporting more products or serving more markets does not necessarily result in higher stability of firm sales.

JEL Codes: F14, F43, O57

DOI: 10.23656/25045520/32016/0007

Keywords: export diversification, export share, volatility of sales, business cycle, Central and Eastern Europe, CEE

Corresponding authorʼs e-mail address: jaanika.merikyll [at] eestipank.ee

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The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank or the Eurosystem.