The contraction of imports in Spain: a temporary phenomenon?

The amount Spain imports has fallen considerably in recent years, but what explains this trend? To answer this question, this paper analyses the relationship between imports, relative prices and internal and external demand. It finds that although improved competitiveness has indeed helped Spain to reduce its imports, a large part of the fall has come from the decline in domestic demand. With domestic demand and imports already starting to pick up again, maintaining the reduction in imports that has been achieved will depend on continued improvements in competitiveness and less dependence on domestic demand for growth.