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Dimensions of Competitiveness$
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Paul De Grauwe

Print publication date: 2010

Print ISBN-13: 9780262013963

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262013963.001.0001

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Explaining and Forecasting Euro Area Exports: Which Competitiveness Indicator Performs Best?

Explaining and Forecasting Euro Area Exports: Which Competitiveness Indicator Performs Best?

Chapter:
(p.121) 4 Explaining and Forecasting Euro Area Exports: Which Competitiveness Indicator Performs Best?
Source:
Dimensions of Competitiveness
Author(s):

Michele C′ Zorzi

Bernd Schnatz

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262013963.003.0004

This chapter examines whether it is possible to identify a cost and price-competitiveness indicator that outperforms others in explaining and predicting extra-euro area export volumes. To this end, it considers five measures of real effective exchange rates (REER) plus one based on relative export prices, reviewing their usefulness as plausible measures of competitiveness for the euro area. After concluding that, from a methodological standpoint, neither can a priori be defined as “superior” or “inferior,” their relative empirical performance is assessed. The chapter evaluates the responsiveness of export flows to price competitiveness changes by estimating a number of key elasticities, and also examines their relative performance in explaining and forecasting export flows.

Keywords:   price-competitiveness indicator, export volumes, REER, relative export prices, export flows

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