An Assessment of the Trends in International Price Competitiveness Among Emu Countries

DIMENSIONS OF COMPETITIVENESS, pp. 149-179, Paul de Grauwe, ed., MIT Press, Cambridge, Massachusetts, 2010

Posted: 7 Mar 2012

Multiple version iconThere are 2 versions of this paper

Date Written: 2010

Abstract

Inflation differentials within European Monetary Union (EMU) are increasingly seen as exerting adverse effects on the price competitiveness of member countries’ firms and – given the common monetary policy within EMU – as being detrimental to euro-area economies, in particular to those with relatively high inflation rates. Using three simple measures of international price competitiveness for EMU countries, the paper analyses whether these indicators have displayed distinctive trends since the start of EMU and whether they converge with or diverge from their respective fundamental value. It is found that all three indicators suggest a gain in competitiveness for the German economy and a corresponding loss for Italy, Portugal and Spain. Two of the indicators, however, suggest that these trends reduce former disparities and, thus, contribute to a convergence of competitiveness within EMU while the third would imply the opposite.

Keywords: price competitiveness, EMU, purchasing power parity

JEL Classification: F36, E31, F31

Suggested Citation

Fischer, Christoph A., An Assessment of the Trends in International Price Competitiveness Among Emu Countries (2010). DIMENSIONS OF COMPETITIVENESS, pp. 149-179, Paul de Grauwe, ed., MIT Press, Cambridge, Massachusetts, 2010, Available at SSRN: https://ssrn.com/abstract=2017502

Christoph A. Fischer (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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