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Non-Price Competitiveness Gains of Central, Eastern and Southeastern European Countries in the EU Market

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Abstract

We propose an export price indicator adjusted for non-price factors as a more meaningful measure of a country’s competitiveness than traditional indicators. Our starting point is the approach developed by Broda and Weinstein (2006), who adjust price developments for changes in varieties of imported products. We relax their assumption of unchanged quality over time and use the proposed index to analyze the momentum of export prices of the ten CESEE EU members which acceded in 2004 and 2007. The index is calculated using data from Eurostat Comext at the highly disaggregated eight-digit CN product level. Our analysis spans the time period 1999 to 2011, thus including the recent global recession period in 2009. The results show that all CESEE-10 countries experienced a loss in price competitiveness, but that the loss was much smaller than is usually suggested by traditional CPI- or ULC-based real effective exchange rate measures. Although relative export prices (unit values) increased more strongly in the CESEE-10 countries as compared to their competitors, the average quality of their goods increased even more strongly, thus fully compensating for the rise in prices. These improvements in non-price competitiveness were pronounced in all CESEE-10 countries.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Focus-on-European-Economic-Integration/2012/Focus-on-European-Economic-Integration-Q3-12/chapters/feei_2012_q3_studies2_tcm16-249596.pdf
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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

Volume (Year): (2012)
Issue (Month): 3 ()
Pages:

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Handle: RePEc:onb:oenbfi:y:2012:i:3:b:2

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Related research

Keywords: Non-price competitiveness; quality; relative export price; new EU Member States;

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References

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  1. Konstantins Benkovskis & Julia Wörz, 2011. "How Does Quality Impact on Import Prices?," Working Papers 175, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
  3. Justin R. Pierce & Peter K. Schott, 2012. "Concording U.S. Harmonized System categories over time," Finance and Economics Discussion Series 2012-16, Board of Governors of the Federal Reserve System (U.S.).
  4. Mohler, Lukas & Seitz, Michael, 2010. "The Gains from Variety in the European Union," Discussion Papers in Economics 11477, University of Munich, Department of Economics.
  5. Uwe Dulleck & Neil Foster & Robert Stehrer & Julia Woerz, 2005. "Dimensions of quality upgrading," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 51-76, 01.
  6. Konstantins Benkovskis & Ramune Rimgailaite, 2011. "The quality and variety of exports from the new EU member states," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(4), pages 723-747, October.
  7. Blonigen, Bruce A. & Soderbery, Anson, 2010. "Measuring the benefits of foreign product variety with an accurate variety set," Journal of International Economics, Elsevier, vol. 82(2), pages 168-180, November.
  8. Michael A. Landesmann & Robert Stehrer, 2002. "Evolving Competitiveness of CEEC’s in an Enlarged Europe," Rivista di Politica Economica, SIPI Spa, vol. 92(1), pages 23-88, January-F.
  9. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
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Citations

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Cited by:
  1. Benkovskis, Konstantins & Wörz, Julia, 2013. "Non-price competitiveness of exports from emerging countries," Working Paper Series 1612, European Central Bank.
  2. Vasily Astrov & Sandor Richter & Arno Tausch, 2013. "Monthly Report No. 2/2013," wiiw Monthly Reports 2013-02, The Vienna Institute for International Economic Studies, wiiw.
  3. Katalin Bodnár & György Molnár & Gábor Pellényi & Lajos Szabó & Judit Várhegyi, 2013. "Dynamics of the trade balance and developments in exports and imports," MNB Bulletin, Magyar Nemzeti Bank (the central bank of Hungary), vol. 8(Special), pages 37-45, October.
  4. Francesco Di Comite, 2012. "Measuring quality and non-cost competitiveness at a country-product level," European Economy - Economic Papers 467, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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