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Measuring competitiveness

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  • J. Peter Neary

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.

Suggested Citation

  • J. Peter Neary, 2005. "Measuring competitiveness," Working Papers 200521, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:200521
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    File URL: http://hdl.handle.net/10197/1314
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    References listed on IDEAS

    as
    1. J. Peter Neary, 2003. "Competitive versus Comparative Advantage," The World Economy, Wiley Blackwell, vol. 26(4), pages 457-470, April.
    2. Carlin, Wendy & Glyn, Andrew & Van Reenen, John, 2001. "Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness," Economic Journal, Royal Economic Society, vol. 111(468), pages 128-162, January.
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    13. Barry, F, 1997. "Dangers for Ireland of and EMU without the UK : Some Calibration Results," Papers 97/20, College Dublin, Department of Political Economy-.
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    17. 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.
    18. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
    19. 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, December.
    20. Jacques R. Artus & Rudolf R. Rhomberg, 1973. "A Multilateral Exchange Rate Model (Un modèle de taux de change multilatéral) (Un modelo multilateral de tipos de cambio)," IMF Staff Papers, Palgrave Macmillan, vol. 20(3), pages 591-611, November.
    21. Ian Marsh & Stephen Tokarick, 1996. "An assessment of three measures of competitiveness," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(4), pages 700-722, December.
    22. J. Peter Neary, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 551-570.
    23. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    24. Walsh, Brendan, 2000. "Cyclical and Structural Influences on Irish Unemployment," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 119-145, January.
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    Cited by:

    1. Angela Cheptea & Lionel Fontagné & Soledad Zignago, 2014. "European export performance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(1), pages 25-58, February.
    2. Nora Albu & Heike Joebges & Rudolf Zwiener, 2018. "Increasing competitiveness at any price?," IMK Working Paper 192-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Rentschler, Jun & Kornejew, Martin, 2017. "Energy price variation and competitiveness: Firm level evidence from Indonesia," Energy Economics, Elsevier, vol. 67(C), pages 242-254.
    4. Mr. Bogdan Lissovolik & Mr. Julio Escolano & Ms. Stefania Fabrizio & Mr. Werner Schule & Mr. Herman Z Bennett & Mr. Stephen Tokarick & Mr. Yuan Xiao & Ms. Marialuz Moreno Badia & Miss Eva Gutierrez & , 2008. "Competitiveness in the Southern Euro Area: France, Greece, Italy, Portugal, and Spain," IMF Working Papers 2008/112, International Monetary Fund.
    5. Mr. Herman Z Bennett & Ziga Zarnic, 2008. "International Competitiveness of the Mediterranean Quartet: A Heterogeneous-Product Approach," IMF Working Papers 2008/240, International Monetary Fund.
    6. Arvis, Jean-Francois, 2013. "How many dimensions do we trade in ? product space geometry and latent comparative advantage," Policy Research Working Paper Series 6478, The World Bank.
    7. Jules Leichter & Cristina Mocci & Stefania Pozzuoli, "undated". "Measuring External Competitiveness:An Overview," Working Papers 2, Department of the Treasury, Ministry of the Economy and of Finance.

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    More about this item

    Keywords

    Competitiveness; Economic theory of index numbers; European Monetary Union (EMU); Real effective exchange rates (REERs); Competition; Index numbers (Economics); Economic and Monetary Union; Foreign exchange rates--Ireland;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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