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Measuring Competitiveness

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  • J Peter Neary

    (University College of Dublin)

Abstract

This paper reviews alternative approaches to measuring an economy's cost competitiveness and proposes some new measures derived from the economic theory of index numbers. The indices provide a theoretical benchmark for estimated real effective exchange rates, but differ from standard measures in that they are based on marginal rather than average sectoral shares in GDP or employment. The use of the new indices is illustrated by some simple calculations which highlight the potential exposure of the Irish economy to fluctuations in the euro-sterling exchange rate.

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File URL: http://www.ucd.ie/economics/research/papers/2005/WP05.21.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200521.

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Length: 18 pages
Date of creation: 11 Nov 2005
Date of revision:
Handle: RePEc:ucn:wpaper:200521

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Postal: UCD, Belfield, Dublin 4
Phone: +353-1-7067777
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics
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Keywords: competitiveness; economic theory of index numbers; European Monetary Union (EMU); real effective exchange rates (REERs);

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References

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  1. Lane, Philip R., 1999. "The New Open Economy Macroeconomics: a Survey," CEPR Discussion Papers 2115, C.E.P.R. Discussion Papers.
  2. Patrick Honohan & Brendan Walsh, 2002. "Catching Up with the Leaders: The Irish Hare," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 1-78.
  3. J. Peter Neary, 2003. "Competitive versus Comparative Advantage," The World Economy, Wiley Blackwell, vol. 26(4), pages 457-470, 04.
  4. Wendy Carlin & Andrew Glyn & John Van Reenen, 1999. "Export Market Performance of OECD countries: an empirical examination of the role of cost competitiveness," IFS Working Papers W99/22, Institute for Fiscal Studies.
  5. Anderson, James E. & Neary, J. Peter, 1992. "A new approach to evaluating trade policy," Policy Research Working Paper Series 1022, The World Bank.
  6. Bayoumi, Tamim & Jayanthi, Sarma & Lee, Jaewoo, 2006. "New Rates from New Weights," CEPR Discussion Papers 5860, C.E.P.R. Discussion Papers.
  7. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-60, June.
  8. Baker, Terence J. & FitzGerald, John & Honohan, Patrick, 1996. "Economic Implications for Ireland of EMU," Research Series, Economic and Social Research Institute (ESRI), number PRS28.
  9. Barry, F, 1997. "Dangers for Ireland of and EMU without the UK : Some Calibration Results," Papers 97/20, College Dublin, Department of Political Economy-.
  10. Menzie D. Chinn, 2005. "A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation," NBER Working Papers 11521, National Bureau of Economic Research, Inc.
  11. Ian Marsh & Stephen Tokarick, 1996. "An assessment of three measures of competitiveness," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 132(4), pages 700-722, December.
  12. Neary, J Peter, 1987. "Determinants of the Equilibrium Real Exchange Rate," CEPR Discussion Papers 209, C.E.P.R. Discussion Papers.
  13. Richard W. Blundell & Martin Browning & Ian A. Crawford, 2003. "Nonparametric Engel Curves and Revealed Preference," Econometrica, Econometric Society, vol. 71(1), pages 205-240, January.
  14. James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200.
  15. Walsh, Brendan, 2000. "Cyclical and Structural Influences on Irish Unemployment," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 119-45, January.
  16. Valerie Cerra & Jarkko Soikkeli, 2002. "How Competitive is Irish Manufacturing?," IMF Working Papers 02/160, International Monetary Fund.
  17. J. Peter Neary, 2004. "Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income," American Economic Review, American Economic Association, vol. 94(5), pages 1411-1428, December.
  18. Neary, J Peter, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 551-70, August.
  19. Cassidy, Mark & O'Brien, Derry, 2005. "Export Performance and Competitiveness of the Irish Economy," Quarterly Bulletin Articles, Central Bank of Ireland, pages 75-95, July.
  20. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  21. Neary, J.P. & Thom, D.R., 1996. "Punts, Pounds and Euros: In Search of an Optimum Currency Area," Papers 96/24, College Dublin, Department of Political Economy-.
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Citations

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Cited by:
  1. Bogdan Lissovolik & Julio Escolano & Stefania Fabrizio & Werner Schule & Herman Z. Bennett & Stephen Tokarick & Yuan Xiao & Marialuz Moreno Badia & Eva Gutierrez & Iryna V. Ivaschenko, 2008. "Competitiveness in the Southern Euro Area: France, Greece, Italy, Portugal, and Spain," IMF Working Papers 08/112, International Monetary Fund.
  2. Zarnic, Ziga & Bennett, Herman, 2009. "International competitiveness of the Mediterranean quartet: a heterogeneous-product approach," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/296233, Katholieke Universiteit Leuven.
  3. Cheptea, A. & Fontagné, L. & Zignago, S., 2012. "European Export Performance," Working papers 393, Banque de France.
  4. Jules Leichter & Cristina Mocci & Stefania Pozzuoli, . "Measuring External Competitiveness:An Overview," Working Papers 2, Department of the Treasury, Ministry of the Economy and of Finance.

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