A Consistent Set of Multilateral Productivity Approach-Based Indicators of Price Competitiveness

36 Pages Posted: 21 Jun 2016

See all articles by Christoph A. Fischer

Christoph A. Fischer

Deutsche Bundesbank

Oliver Hossfeld

Handelshochschule Leipzig (HHL)

Multiple version iconThere are 2 versions of this paper

Date Written: 2014

Abstract

We propose a novel, multilaterally consistent productivity approach-based indicator to assess the international price competitiveness of 57 industrialized and emerging economies. It is designed to be a useful assessment tool for monetary policy authorities and, thereby, differs from previously proposed indicators, which are hardly applicable on a day-to-day basis. Special attention has been paid to an appropriate selection of price and productivity data in levels as opposed to indices, and to the treatment of country fixed effects when interpreting currency misalignments. The discussion of the results focuses on the larger economies of the sample. At the current juncture, and in contrast to the prevailing view, we find US price competitiveness to be above and China's price competitiveness to be below its derived benchmark.

Keywords: equilibrium exchange rates, productivity approach, price competitiveness, panel cointegration

JEL Classification: F31, C23

Suggested Citation

Fischer, Christoph A. and Hossfeld, Oliver, A Consistent Set of Multilateral Productivity Approach-Based Indicators of Price Competitiveness (2014). Available at SSRN: https://ssrn.com/abstract=2796961 or http://dx.doi.org/10.2139/ssrn.2796961

Christoph A. Fischer (Contact Author)

Deutsche Bundesbank ( email )

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

Oliver Hossfeld

Handelshochschule Leipzig (HHL) ( email )

Jahnallee 59
Leipzig, D-04109
Germany

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