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The Dynamics of Product Quality and International Competitiveness

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Author Info

  • Ashoka Mody
  • Deniz Igan
  • Stefania Fabrizio

Abstract

Despite the appreciation of the exchange rate, the eight Central and Eastern European countries (the CEE-8) that entered the European Union in May 2004 have achieved a decade of impressive export growth, expanding significantly their shares of world markets. Does this mean that the real exchange rate is irrelevant? If not, what other factors compensated for the appreciation to explain the apparently strong competitiveness of these economies? And will these favorable factors continue to power export growth? This paper places in international context the achievements of the CEE-8 and helps more broadly to identify the determinants of international competitiveness. Building from data at the six-digit level of disaggregation, it shows that the CEE-8 made an impressive shift in product quality and in the technological intensity of exports, and that these shifts associated with the structural transformation were also associated with increased market share. The analysis strongly suggests that, when trading in international markets, countries benefit from higher product quality. However, while the structural transformation achieved was valuable in raising market shares, the easy gains from this process may be over.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/97.

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Length: 33
Date of creation: 01 Apr 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/97

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Related research

Keywords: Export competitiveness; European Union; Consumer goods; reer; trading partners; export growth; world exports; export performance; world markets; world market; export share; export shares; international trade; international markets; partner country; world trade; share of world exports; trade data; global trade; real effective exchange rate; trade values; trading partner; trade flows; domestic production; export structure; export data; export expansion; exporting country; export flows; product differentiation; trade liberalization; trade-weighted average; skilled labor; country of origin; imperfect competition; share of exports; open economies; trade barriers; export unit; international standard; bilateral trade; export quality; economic integration; importing countries; export basket; income convergence; external finance; commodity trade; trade models;

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References

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Citations

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Cited by:
  1. Konstantins Benkovskis & Julia Woerz, 2012. "Evaluation of Non-price Competitiveness of Exports from Central, Eastern and Southeastern European Countries in the EU Market," Working Papers, Latvijas Banka 2012/01, Latvijas Banka.
  2. Konstantins Benkovskis, 2012. "Competitiveness of Latvia's Exporters," Working Papers, Latvijas Banka 2012/03, Latvijas Banka.
  3. Daniel Leigh & Abdul Abiad & Ashoka Mody, 2007. "International Finance and Income Convergence," IMF Working Papers 07/64, International Monetary Fund.
  4. Klaus Regling & Servaas Deroose & Reinhard Felke & Paul Kutos, 2010. "The Euro After Its First Decade : Weathering the Financial Storm and Enlarging the Euro Area," Governance Working Papers 22817, East Asian Bureau of Economic Research.
  5. Veerle Miranda & Marialuz Moreno Badia & Ilke Van Beveren, 2012. "Globalization drives strategic product switching," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 148(1), pages 45-72, April.
  6. Karsten Staehr, 2008. "The Maastricht Inflation Criterion and the New EU Members from Central and Eastern Europe," Bank of Estonia Working Papers, Bank of Estonia 2008-04, Bank of Estonia, revised 30 Oct 2008.
  7. Bogdan Lissovolik, 2008. "Trends in Italy’s Nonprice Competitiveness," IMF Working Papers 08/124, International Monetary Fund.
  8. International Monetary Fund, 2012. "Assessing Competitiveness Using Industry Unit Labor Costs," IMF Working Papers 12/107, International Monetary Fund.
  9. Eleonora Cavallaro & Piero Esposito & Alessia Matano & Marcella Mulino, 2012. "Technological catching up, quality of exports and competitiveness: a sectoral perspective," Working Papers, University of Rome La Sapienza, Department of Public Economics 158, University of Rome La Sapienza, Department of Public Economics.
  10. Daniel Leigh & Stefania Fabrizio & Ashoka Mody, 2009. "The Second Transition," IMF Working Papers 09/43, International Monetary Fund.
  11. Gokhan Yilmaz & Rauf Gonenc, 2008. "How did the Turkish Industry Respond to Increased Competitive Pressures, 1998-2007?," Working Papers 0804, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  12. Bacchiega, Emanuele & Minniti, Antonio, 2009. "The Quality-Income effect and the selection of location," Journal of Urban Economics, Elsevier, vol. 65(2), pages 209-215, March.
  13. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
  14. Regling, Klaus & Deroose, Servaas & Felke, Reinhard & Kutos, Paul, 2010. "The Euro After Its First Decade: Weathering the Financial Storm and Enlarging the Euro Area," ADBI Working Papers, Asian Development Bank Institute 205, Asian Development Bank Institute.
  15. Bruha, Jan & Podpiera, Jirí, 2011. "The dynamics of economic convergence: The role of alternative investment decisions," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 35(7), pages 1032-1044, July.
  16. Jean-Louis Racine, 2011. "Harnessing Quality for Global Competitiveness in Eastern Europe and Central Asia," World Bank Publications, The World Bank, number 2305, August.

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