Determinants of Export and Import Functions in the EU Member Countries

Current account imbalances and their sustainability in the European Union member countries has been examined in the recent empirical literature since the establishment of the Euro Area. Deeper trade integration within the European Union is generally beneficial. However, international frag-mentation of production resulting from emergence of global value chains deepens external imbalances due to persisting differences in macroeconom-ic performance among member countries. The main objective of the paper is to examine effects of price and non-price determinants of exports and imports in 21 European Union member coun-tries. We have estimated the determinants of export and import demand functions in the 21 European Union member countries. Our results indicate the high role of imports in aggregate export functions, while aggregate functions indicated a high contribution of domestic demand to the imports dynamics. Disaggregated analysis revealed the importance of intermediates in the external trade within and outside the European Union from territorial and commodity aspects.