Exploring price and non-price determinants of trade flows in the largest euro-area countries
Claire Giordano and
Francesco Zollino (francesco.zollino@bancaditalia.it)
Additional contact information
Francesco Zollino: Banca d'Italia
No 233, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area
Abstract:
Since the mid-2000s standard price-competitiveness indicators for some European countries have been providing conflicting signals, particularly in Italy. Against a broad stability of the producer price (PPI)-based measure, the manufacturing unit labour cost (ULCM)-deflated indicator points to a major cumulated loss of competitiveness in Italy. We find that this discrepancy mostly reflects the divergence of ULCM and PPI trends in competitor countries while in Italy they have actually progressed hand in hand. Owing to the internationalization of production processes and to the subsequent fading representativeness of labour in respect of overall costs, seen to a different degree across countries, price-based indicators are arguably more appropriate than those based on ULCMs to assess external competitiveness and external performance. We provide empirical evidence that points in the same direction. In Italy ULC-based indicators play a less important role relative to price-deflated measures in explaining both export and import trends; this result does not hold for Germany and France. Moreover, a proxy for non-price competitiveness proves important in explaining Italian, German and, in particular, Spanish exports.
Keywords: price competitiveness; non-price competitiveness; unit labour costs; producer prices (search for similar items in EconPapers)
JEL-codes: F14 F62 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-eec and nep-int
References: Add references at CitEc
Citations: View citations in EconPapers (5)
Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/qef/2014-0233/QEF-233.pdf (application/pdf)
Related works:
Journal Article: Shedding Light on Price- and Non-price-competitiveness Determinants of Foreign Trade in the Four Largest Euro-area Countries (2016)
Working Paper: Exploring price and non-price determinants of trade flows in the largest euro-area countries (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_233_14
Access Statistics for this paper
More papers in Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by (angela.barbaro@bancaditalia.it).