An Assessment of the Trends in International Price Competitiveness among EMU Countries
An Assessment of the Trends in International Price Competitiveness among EMU Countries
This chapter uses three alternative, simple equilibrium concepts of the real exchange rate to determine for each of the European Monetary Union (EMU) economies whether international price competitiveness has improved or deteriorated since the monetary union was created in 1999. It focuses on whether the computed change in competitiveness represents divergence from the respective equilibrium and is, therefore, a genuine matter for concern. The chapter shows that, regardless of the equilibrium concept used, Germany enjoyed a remarkable increase in competitiveness against its trading partners within the euro area, while Italy, Portugal, Spain, Ireland, and Luxembourg lost price competitiveness.
Keywords: equilibrium concepts, real exchange rate, European Monetary Union, price competitiveness, Germany, euro area, Italy, Portugal, Spain, Ireland
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