A competitiveness measure based on sector unit labour costs

Gil Mehrez, Laura Fernandez Vilaseca and Josefina Monteagudo

Quarterly Report on the Euro Area (QREA), 2014, vol. 13, issue 2, 34-40

Abstract: This section presents a new indicator of competitiveness to complement the real effective exchange rate (REER) (68). The new indicator is produced by evaluating competitiveness at sector level (i.e. ULC-based REER per sector) and then aggregating over all sectors in the economy to get an economy-wide measure of competitiveness. This captures the different dynamics of each sector and country that may not be identified by the measure using aggregate data (e.g. the economywide ULC index). When the new measure is applied to the euro-area countries, it gives new insights into competitiveness developments before and after the crisis. It highlights that external vulnerabilities can be a result of a boom in aggregate demand that shifts resources to nontraded sectors while having only a limited impact on the competitiveness of each sector.

Keywords: unit labour costs; competitiveness (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:euf:qreuro:0132-04

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