Examining the Factors Affecting Exports Performance: Empirical Evidence from Finland

Abstract

The present research is an effort to diagnose the exigent determinants of exports in Finland by using time series data from 1993-2020. The study employs a vector-error correction model (VECM) by using Johansen technique for co-integration. The empirical findings of the co-integration indicate the existence of a significant relationship between exports and its various determinants in the long run. The results of VECM revealed that exchange rate and remittances are significant and positive determinants of Finland’s exports in the long run. In the meanwhile, the impact of the exchange rate and remittances is significant but negative on the exports of Finland in the short run. On the other hand, industrial growth and corruption are incorporated in the model as exogenous factors in the short-run dynamics. The impact of industrial growth is positive and significant on the export's performance while corruption is negatively affecting the exports of the Finnish economy. The study suggests a conducive and stable exchange rate policy and control of corruption to encourage exports.