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Real Exchange Rates and Competitiveness; A Clarification of Concepts, and Some Measurements for Europe


  • Leslie Lipschitz
  • Donogh McDonald


This paper examines indicators of competitiveness. It analyzes the conceptual foundations of conventional measures of the real exchange rate and finds that inferences about competitiveness from these indicators require strong, and in many cases implausible, assumptions. Based on this analysis some alternative measures are proposed and their use is illustrated using data from Europe. Given the usefulness of standardized indicators, four simple charts are proposed; these help solve some conundrums in the European data and provide the basis for a richer set of inferences about competitiveness.

Suggested Citation

  • Leslie Lipschitz & Donogh McDonald, 1991. "Real Exchange Rates and Competitiveness; A Clarification of Concepts, and Some Measurements for Europe," IMF Working Papers 91/25, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:91/25

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    References listed on IDEAS

    1. Guilkey, David K. & Schmidt, Peter, 1989. "Extended tabulations for Dickey-Fuller tests," Economics Letters, Elsevier, vol. 31(4), pages 355-357, December.
    2. Carmen M. Reinhart & Peter Wickham, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 175-213, June.
    3. Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 1-23.
    4. Pindyck, Robert S & Rotemberg, Julio J, 1990. "The Excess Co-movement of Commodity Prices," Economic Journal, Royal Economic Society, vol. 100(403), pages 1173-1189, December.
    5. Gilbert, Christopher L, 1989. "The Impact of Exchange Rates and Developing Country Debt on Commodity Prices," Economic Journal, Royal Economic Society, vol. 99(397), pages 773-784, September.
    6. Eduardo Borensztein & Carmen M. Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 236-261, June.
    7. Reinhart, Carmen & Borensztein, Eduardo, 1994. "The Macroeconomic Determinants of Commodity Prices," MPRA Paper 6979, University Library of Munich, Germany.
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    Cited by:

    1. Luis Catão & Elisabetta Falcetti, 2002. "Determinants of Argentina’s External Trade," Journal of Applied Economics, Universidad del CEMA, vol. 5, pages 19-57, May.
    2. Andrea Saayman, 2007. "The Real Equilibrium South African Rand/US Dollar Exchange Rate: A Comparison of Alternative Measures," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 13(2), pages 183-199, May.
    3. Eckhard Siggel, 2006. "International Competitiveness and Comparative Advantage: A Survey and a Proposal for Measurement," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 137-159, June.
    4. Jaime R. Marquez, 1992. "Real exchange rates: measurement and implications for predicting U.S. external imbalances," International Finance Discussion Papers 427, Board of Governors of the Federal Reserve System (U.S.).
    5. International Monetary Fund, 2002. "Tunisia’s Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime," IMF Working Papers 02/190, International Monetary Fund.
    6. Ulf Schoefisch, 1992. "Measures of external and internal competitiveness," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 55, march.
    7. Ondrej Schneider & Jan Zapal, 2006. "Fiscal Policy in New EU Member States: Go East, Prudent Man!," Post-Communist Economies, Taylor & Francis Journals, vol. 18(2), pages 139-166.
    8. Stephan Mumenthaler & Barbara von Schnurbein, 2016. "The stickiness of national competitiveness: Implications for Switzerland and beyond," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(01), pages 27-43, February.
    9. Roman Horváth, 2005. "Real Equilibrium Exchange Rate Estimates: To What Extent Are They Applicable for Setting the Central Parity?," Working Papers IES 75, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
    10. Charalambos G Tsangarides & Gustavo Ramirez, 2007. "Competitiveness in the CFA Franc Zone," IMF Working Papers 07/212, International Monetary Fund.
    11. Elena Loukoianova & Plamen K Iossifov, 2007. "Estimation of a Behavioral Equilibrium Exchange Rate Model for Ghana," IMF Working Papers 07/155, International Monetary Fund.
    12. Claudio A Paiva, 2006. "External Adjustment and Equilibrium Exchange Rate in Brazil," IMF Working Papers 06/221, International Monetary Fund.
    13. repec:kap:iaecre:v:13:y:2007:i:2:p:183-199 is not listed on IDEAS


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