Determinants of the Portuguese GDP stagnation during the 2001-2014 period: an empirical investigation

Abstract

The current paper aims at analysing the long Portuguese output stagnation during the period 2001-2014. Using a VEC model, the effect of exports, investment, public external liabilities and the country’s risk premium on growth is analysed. Our study reveals that, in the long run, Portuguese GDP is determined by exports, the country’s risk-premium and capital formation while in the short-run, growth is negatively affected by the country’s risk premium and external public liabilities. Our findings also support the vulnerability of the Portuguese economy to ex-ternal developments, in particular, we identified a negative effect of China’s higher trade inte-gration and the relevance of world market conditions.