International Competitiveness of the Mediterranean Quartet: A Heterogeneous-Product Approach
IMF Working Papers, October 1, 2008
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- International Competitiveness of the Mediterranean Quartet: A Heterogeneous-Product Approach
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Bibliographic details
- Authors: Herman Z Bennett, Ziga Zarnic
- Published: October 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870985.001
Methodology
- Develops a methodology to estimate the real effective exchange rate (REER) that incorporates two elements not considered in the current literature:
- (i) product heterogeneity when identifying each country's international competitors and their weights.
- (ii) a comprehensive treatment of services exports.
Scope and Sample
- Applies the methodology to the Mediterranean Quartet (MQ): Greece, Italy, Portugal, and Spain.
- Compares MQ results to the rest of the euro area countries using the same methodology (difference-in-difference estimates).
Key Findings
- The refined REER measure suggests a modest reduction in the observed REER gap between the MQ countries and the other euro area countries.
- Considering product heterogeneity and services exports implies a lower real appreciation from 1998 to 2006 on the order of 2-3 percent for all MQ countries.
- The results are reported as difference-in-difference estimates relative to the rest of the euro area countries using the same methodology.
Subjects and Keywords
- Subjects: Competition, Exports, Manufacturing, Real effective exchange rates, Service exports
- Keywords: base year, cost competitiveness, emerging market, growth rate, WP