Determinants of Estonian export of goods: an econometric analysis and comparison with Latvia and Lithuania

The goal of this paper was to analyse empirically the importance of different determinants of Estonian export and compare the results with Latvia and Lithuania. For a theoretical model, the imperfect substitutes model was chosen. For empirical estimation Estonian nominal export was disaggregated by commodity groups, by customs procedures and by groups of destination countries. Besides that an equation of real aggregate goods' export and models of Latvian and Lithuanian export by commodity groups were estimated. According to estimated models Estonian export is mainly determined by manufacturing output in Finland and Sweden and real economic growth in other EU countries. Also real consumption in neighbouring countries is important for Estonian export, but here the countries of influence change - the influence of Russia declines as the influence of Western countries rises. Prices and exchange rates have smaller effect to Estonian exports. The comparison of the results of Estonian export modelling to those of Latvia and Lithuania shows that the main determinants of export in three countries are different. While Estonian export is mainly influenced by Nordic economies, Latvian and Lithuanian export is mainly influenced by Germany and the UK. The influence of Russia has declined in all three countries, remaining the highest in the case of Lithuania.