On the Suitability of Alternative Competitiveness Indicators for Explaining Real Exports of Advanced Economies
23 Pages Posted: 10 Oct 2016
Date Written: 2016
Real exports are commonly specified as depending on an indicator of price competitiveness and on a measure of foreign activity. This study empirically investigates the suitability of alternative competitiveness indicators in explaining real exports for a broad group of advanced economies. To this end, a panel cointegration analysis is conducted, augmented by a forecasting exercise. In the latter, repeated sampling techniques are used in order to avoid arbitrary sample splits. We find that broad price- and cost-based indicators are to be preferred to narrow price based measures such as CPI- or PPI-deflated real exchange rates. Furthermore, the evidence points towards using world trade as the external activity variable instead of GDP- or real imports-based measures.
Keywords: international price competitiveness, real export demand, price elasticity of exports
JEL Classification: C23, F14, F31, F47
Suggested Citation: Suggested Citation