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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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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: 27-47

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

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

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References

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  1. 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.
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  11. 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.
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Citations

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Cited by:
  1. Konstantins Benkovskis, 2012. "Competitiveness of Latvia's Exporters," Working Papers 2012/03, Latvijas Banka.
  2. 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.
  3. 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.
  4. Konstantins Benkovskis & Julia Wörz, 2012. "Non-Price Competitiveness of Exports from Emerging Countries," FIW Working Paper series 100, FIW.
  5. Lucian Claudiu ANGHEL & Florina PINZARU & Mihaela DINU & Laurentiu-Mihai TREAPAT, 2014. "Fixing the Central Parity and the Evolution of the Currency within the Exchange Rate Mechanism II in the Countries that Joined the Euro Zone," Management Dynamics in the Knowledge Economy Journal, College of Management, National University of Political Studies and Public Administration, vol. 2(4), pages 21-40, April.
  6. 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.

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