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Measuring Competitiveness: Trade in Goods or Tasks?

Author

Listed:
  • Mr. Tamim Bayoumi
  • Mika Saito
  • Mr. Jarkko Turunen

Abstract

With global supply chains, any value added or production task can be traded as part of goods. This means that competitiveness can be measured either in terms of “tasks” (Bems and Johnson, 2012), or goods, but with goods prices reflecting the cost of tasks embedded in those goods. We show that when measuring competitiveness in goods, the formula used in computing the real effective exchange rates at the IMF (Bayoumi, Lee, and Jayanthi, 2005) needs to be expressed in terms of the price of value added and needs an additional term, which captures a gain or loss in competitiveness of goods due to outsourcing.

Suggested Citation

  • Mr. Tamim Bayoumi & Mika Saito & Mr. Jarkko Turunen, 2013. "Measuring Competitiveness: Trade in Goods or Tasks?," IMF Working Papers 2013/100, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/100
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    References listed on IDEAS

    as
    1. International Monetary Fund, 1987. "Measuring Price Competitiveness for Industrial Country Trade in Manufactures," IMF Working Papers 1987/034, International Monetary Fund.
    2. International Monetary Fund, 2005. "New Rates from New Weights," IMF Working Papers 2005/099, International Monetary Fund.
    3. Mika Saito, 2004. "Armington elasticities in intermediate inputs trade: a problem in using multilateral trade data," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 1097-1117, November.
    4. Willem Thorbecke & Atsuyuki Kato, 2011. "The Effect of Exchange Rate Changes on Japanese Consumption Exports," Macroeconomics Working Papers 23238, East Asian Bureau of Economic Research.
    5. Thorbecke, Willem, 2011. "Investigating the effect of exchange rate changes on china's processed exports," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 33-46, June.
    6. Mr. Jarkko Turunen & Mr. Richard T. Harmsen & Mr. Tamim Bayoumi, 2011. "Euro Area Export Performance and Competitiveness," IMF Working Papers 2011/140, International Monetary Fund.
    7. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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