Measuring Competitiveness

21 Pages Posted: 31 Oct 2006

See all articles by J. Peter Neary

J. Peter Neary

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2006


This paper reviews alternative approaches to measuring an economy's cost competitiveness and proposes some new measures inspired by the economic theory of index numbers. The indices provide a theoretical benchmark for estimated real effective exchange rates, but differ from standard measures in that they are based on marginal rather than average sectoral shares in GDP or employment. The use of the new indices is illustrated by some simple calculations that highlight the potential exposure of the Irish economy to fluctuations in the euro-sterling exchange rate.

Keywords: Competitiveness, economic theory of index numbers, European Monetary Union (EMU), real effective exchange rates (REERs)

JEL Classification: F40, C43

Suggested Citation

Neary, J. Peter, Measuring Competitiveness (September 2006). IMF Working Paper No. 06/209, Available at SSRN:

J. Peter Neary (Contact Author)

University of Oxford - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

United Kingdom

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