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Measuring Competitiveness; Trade in Goods or Tasks?

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  • Tamim Bayoumi
  • Mika Saito
  • Jarkko Turunen

Abstract

With global supply chains, any value added or production task can be traded as part of goods. This means that competitiveness can be measured either in terms of “tasks” (Bems and Johnson, 2012), or goods, but with goods prices reflecting the cost of tasks embedded in those goods. We show that when measuring competitiveness in goods, the formula used in computing the real effective exchange rates at the IMF (Bayoumi, Lee, and Jayanthi, 2005) needs to be expressed in terms of the price of value added and needs an additional term, which captures a gain or loss in competitiveness of goods due to outsourcing.

Suggested Citation

  • Tamim Bayoumi & Mika Saito & Jarkko Turunen, 2013. "Measuring Competitiveness; Trade in Goods or Tasks?," IMF Working Papers 13/100, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:13/100
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    References listed on IDEAS

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    1. Thorbecke, Willem, 2011. "Investigating the effect of exchange rate changes on china's processed exports," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 33-46, June.
    2. Mika Saito, 2004. "Armington elasticities in intermediate inputs trade: a problem in using multilateral trade data," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 1097-1117, November.
    3. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
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    Cited by:

    1. LOPES, Joao Carlos & SANTOS, Ana, 2016. "Vertical Specialization, Global Value Chains And International Trade: The Rubber And Plastics Industry In Portugal And Comparison With Northern And Southern Eu Countries," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 16(2), pages 15-28.
    2. Menzie Chinn, 2014. "Global supply chains and macroeconomic relationships in Asia," Chapters,in: Asia and Global Production Networks, chapter 8, pages 249-286 Edward Elgar Publishing.
    3. Wörz, Julia & Benkovskis, Konstantins, 2015. ""Made in China" - How does it affect our understanding of global market shares?," Working Paper Series 1787, European Central Bank.
    4. Swarnali Ahmed & Maximiliano Appendino & Michele Ruta, 2015. "Depreciations without Exports?; Global Value Chains and the Exchange Rate Elasticity of Exports," IMF Working Papers 15/400, International Monetary Fund.
    5. Arne J. Nagengast & Robert Stehrer, 2016. "Accounting for the Differences Between Gross and Value Added Trade Balances," The World Economy, Wiley Blackwell, vol. 39(9), pages 1276-1306, September.
    6. Willem Thorbecke, 2015. "Measuring the Competitiveness of China's Processed Exports," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(1), pages 78-100, January.
    7. repec:pal:compes:v:59:y:2017:i:4:d:10.1057_s41294-017-0036-2 is not listed on IDEAS
    8. Ahmed Swarnali & Appendino Maximiliano & Ruta Michele, 2017. "Global value chains and the exchange rate elasticity of exports," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(1), pages 1-24, January.
    9. Campbell, Douglas L., 2016. "Measurement matters: Productivity-adjusted weighted average relative price indices," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 45-81.
    10. Nikhil Patel & Zhi Wang & Shang-Jin Wei, 2014. "Global Value Chains and Effective Exchange Rates at the Country-Sector Level," NBER Working Papers 20236, National Bureau of Economic Research, Inc.
    11. Campbell, Douglas L & Pyun, Ju Hyun, 2014. "Through the Looking Glass: A WARPed View of Real Exchange Rate History," MPRA Paper 55870, University Library of Munich, Germany.
    12. João Carlos Lopes & Ana Santos, 2015. "Vertical Specialization, Global Value Chains and the changing Geography of Trade: the Portuguese Rubber and Plastics Industry Case," Working Papers Department of Economics 2015/12, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    13. Konstantins Benkovskis & Julia Woerz, 2014. ""Made in China" - How Does it Affect Measures of Competitiveness?," Working Papers 2014/04, Latvijas Banka.
    14. Andrew J Tiffin, 2014. "European Productivity, Innovation and Competitiveness; The Case of Italy," IMF Working Papers 14/79, International Monetary Fund.
    15. THORBECKE, Willem, 2014. "Rebalancing Trade within East Asian Supply Chains," Discussion papers 14002, Research Institute of Economy, Trade and Industry (RIETI).
    16. Byron Gangnes & Ari Van Assche, 2016. "Global Value Chains and Changing Trade Elasticities," Working Papers 2016-11, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    17. Syed Al-Helal Uddin, 2016. "Value-added Trade, Exchange Rate Pass-Through and Trade Elasticity: Revisiting the Trade Competitiveness," 2016 Papers pud11, Job Market Papers.
    18. Buelens, Christian & Tirpák, Marcel, 2017. "Reading the Footprints: how foreign investors shape countries' participation in global value chains," Working Paper Series 2060, European Central Bank.

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