Measuring the effectiveness of cost and price competitiveness in external rebalancing of euro area countries: What do alternative HCIs tell us?

Olegs Tkacevs and Styliani Christodoulopoulou

No 1736, Working Paper Series from European Central Bank

Abstract: This study examines the marginal effects of traditional determinants of exports and imports with a focus on the role of price competitiveness in restoring external balances. It is a first attempt to compare marginal effects of various harmonised competitiveness indicators (HCIs) on both exports and imports of both goods and services across individual euro area countries. We find evidence that HCIs based on broader cost and price measures have a larger marginal effect (with some exceptions) on exports of goods. Exports of services are sensitive to HCIs in big euro area countries and Slovakia, where exports of services are also found more sensitive to competitiveness indicators based on broader price measures. Imports of goods and imports of services are quite insensitive to changes in relative prices. Finally, in some cases measures of fit indicate that a large unexplained residual part is present, implying that other non-price related factors might play an important role in driving foreign trade. JEL Classification: F14, F31, F41

Keywords: euro area; export; imports; price competitiveness; real exchange rate (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-eec and nep-int
Note: 2304852
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Measuring the Effectiveness of Cost and Price Competitiveness in External Rebalancing of Euro Area Countries: What Do Alternative HCIs Tell Us? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20141736

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