Measuring External Competitiveness: An Overview

Abstract

The analysis of a country's competitiveness is of great interest to policy makers. Measuring the competitiveness of a country generally requires an assessment of the overall dynamism of the economy, including productivity and GDP growth, as well as the performance of exporting firms in the global market place. The focus of this paper is to outline the methodology commonly used to determine the state of a country's external performance, both the level and trend, and the factors which have contributed to recent developments. The literature shows that while macroeconomic indicators are essential to provide a broad picture of trends, they should be supplemented with an analysis using microeconomic data. We report on recent work analyzing Italy's external competitiveness which highlights some negative trends, including a loss of export market share, but also shows that there are some positive developments in terms of quality upgrading and firm restructuring. Finally, some preliminary estimates of the potential impact of the recent crisis on external competitiveness are presented using methods of multivariate analysis.

Keywords: Competitiveness, Exports, FDI, International Trade

JEL Classification: F1, F23