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

March 1, 1991

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Competition, Economic sectors, Financial markets, Labor, Labor costs, Manufacturing, Production, Productivity

Keywords: average product, capital productivity rise, capital-augmenting productivity improvement, Competition, competitiveness indicator, cost competitiveness, Europe, exchange rate, goods output, Labor costs, Manufacturing, Productivity, productivity development, rate of return, real exchange rate, sector vis-à-vis, traded goods sector, traded-goods sector, WP

Pages:
48
Volume:
1991
DOI:
https://doi.org/10.5089/9781451844184.001
Issue:
025
Series:
Working Paper No. 1991/025
Stock No:
WPIEA0251991
ISBN:
9781451844184
ISSN:
1018-5941

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