Abstract

https://ssrn.com/abstract=2907587
 


 



Trade in Value Added: Do We Need New Measures of Competitiveness?


Kirsten Lommatzsch


German Institute for Economic Research (DIW Berlin)

Maria Silgoner


Oesterreichische Nationalbank (OeNB)

Paul Ramskogler


Oesterreichische Nationalbank (OeNB)

2016

Bundesbank Discussion Paper No. 52/2016

Abstract:     
It has been argued that the increasing importance of global value chains necessitates a modification of conventional competitiveness measures. We compile a broad dataset including value added trade, gross exports and conventional and value added based real exchange rates. To sharply focus on external competitiveness, a new price competitiveness indicator is introduced, the TWULC (Trade Weighted Unit Labour Cost indicator). It weights sector-specific cost trends according to sector shares in exports. Econometric tests for a panel of 38 countries show that the focus on value added trade generally improves the explanatory power of export equations. Value added exports' sensitivity towards real exchange rates is up to four times higher than that of gross exports. Real effective exchange rates focusing on exporting industries and on value added weights yield more robust results across the specifications, but do not systematically outperform the more conventional measures of price or cost competitiveness.

Number of Pages in PDF File: 39

Keywords: competitiveness, external trade, labour costs

JEL Classification: F14, J30


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Date posted: January 29, 2017  

Suggested Citation

Lommatzsch, Kirsten and Silgoner, Maria and Ramskogler, Paul, Trade in Value Added: Do We Need New Measures of Competitiveness? (2016). Bundesbank Discussion Paper No. 52/2016. Available at SSRN: https://ssrn.com/abstract=2907587

Contact Information

Kirsten Lommatzsch (Contact Author)
German Institute for Economic Research (DIW Berlin) ( email )
Mohrenstraße 58
Berlin, 10117
Germany
Maria Silgoner
Oesterreichische Nationalbank (OeNB)
Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria
Paul Ramskogler
Oesterreichische Nationalbank (OeNB) ( email )
Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria
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