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Reassessing Price-Competitiveness Indicators of the Four Largest Euro-Area Countries and of their Main Trading Partners

Author

Listed:
  • Alberto Felettigh

    (Banca d'Italia)

  • Claire Giordano

    (Banca d'Italia)

  • Giacomo Oddo

    (Banca d'Italia)

  • Valentina Romano

    (Banca d'Italia)

Abstract

This paper provides new Bank of Italy indicators of price competitiveness for 62 countries. We refreshed the approach adopted by the Bank in the 1990s but later discontinued in 2005 due to the cumbersome statistical requirements in order to accommodate the significant extension of the original geographical coverage. Thanks to progress made in data availability, we were able to update the weighting system to 2009-11 and take into account competitive pressures from local producers in all the outlet markets while keeping the same vast geographical coverage. The new indicators show that the developments in price competitiveness since 1999 in the four largest euro-area countries have been slightly more favourable than those gauged by the current measures. However, the competitiveness gap in 2014 vis-�-vis Germany remained unchanged in Italy and Spain, while it increased marginally in France. The cumulative trend for 1999-2014 in France, Germany and Spain was more favourable vis-�-vis euro-area countries than with respect to the others; no significant difference was recorded in Italy.

Suggested Citation

  • Alberto Felettigh & Claire Giordano & Giacomo Oddo & Valentina Romano, 2015. "Reassessing Price-Competitiveness Indicators of the Four Largest Euro-Area Countries and of their Main Trading Partners," Questioni di Economia e Finanza (Occasional Papers) 280, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_280_15
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    References listed on IDEAS

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    1. Marc Klau & San Sau Fung, 2006. "The new BIS effective exchange rate indices," BIS Quarterly Review, Bank for International Settlements, March.
    2. repec:ptu:bdpart:b200702 is not listed on IDEAS
    3. Claire Giordano & Francesco Zollino, 2016. "Shedding Light on Price- and Non-price-competitiveness Determinants of Foreign Trade in the Four Largest Euro-area Countries," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 604-634, August.
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    7. Schmitz, Martin & De Clercq, Maarten & Fidora, Michael & Lauro, Bernadette & Pinheiro, Cristina, 2012. "Revisiting the effective exchange rates of the euro," Occasional Paper Series 134, European Central Bank.
    8. Michael P. Leahy, 1998. "New summary measures of the foreign exchange value of the dollar," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 84(Oct), pages 811-818, October.
    9. Menzie Chinn, 2006. "A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation," Open Economies Review, Springer, vol. 17(1), pages 115-143, January.
    10. Mico Loretan, 2005. "Indexes of the foreign exchange value of the dollar," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 91(Win), pages 1-8.
    11. Tkačevs, Olegs & Christodoulopoulou, Styliani, 2014. "Measuring the effectiveness of cost and price competitiveness in external rebalancing of euro area countries: What do alternative HCIs tell us?," Working Paper Series 1736, European Central Bank.
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    Cited by:

    1. Alberto Felettigh & Claire Giordano, 2018. "Rethinking prices and markets underlying price-competitiveness indicators," Questioni di Economia e Finanza (Occasional Papers) 447, Bank of Italy, Economic Research and International Relations Area.
    2. Silvia Fabiani & Alberto Felettigh & Claire Giordano & Roberto Torrini, 2019. "Making room for new competitors. A comparative perspective on Italy’s exports in the euro-area market," Questioni di Economia e Finanza (Occasional Papers) 530, Bank of Italy, Economic Research and International Relations Area.
    3. Michael Fidora & Claire Giordano & Martin Schmitz, 2021. "Real Exchange Rate Misalignments in the Euro Area," Open Economies Review, Springer, vol. 32(1), pages 71-107, February.
    4. Matteo Bugamelli & Silvia Fabiani & Stefano Federico & Alberto Felettigh & Claire Giordano & Andrea Linarello, 2018. "Back on Track? A Macro–Micro Narrative of Italian Exports," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(1), pages 1-31, March.
    5. Guido Bulligan & Fabio Busetti & Michele Caivano & Pietro Cova & Davide Fantino & Alberto Locarno & Lisa Rodano, 2017. "The Bank of Italy econometric model: an update of the main equations and model elasticities," Temi di discussione (Economic working papers) 1130, Bank of Italy, Economic Research and International Relations Area.
    6. Andrea Ginzburg & Annamaria Simonazzi, 2017. "Out of the Crisis. A radical change of strategy for the Eurozone," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 14(1), pages 13-37, June.

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    More about this item

    Keywords

    price competitiveness; real effective exchange rates; trade weights; local producer competition;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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