Which factors shape the relationship between manufacturing and government wages?

Benedicta Marzinotto, Alessandro Turrini 05 September 2014

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During the crisis, numerous Eurozone countries have introduced public wage freezes or cuts as part of an attempt to contain rising fiscal deficits and debts. Some of these countries also had to rebalance their economies, and improve price competitiveness. The relevant question is therefore whether government wages, whilst relevant for fiscal outcomes, may also exert some impact on private-sector labour costs and price competitiveness.

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Topics:  Labour markets

Tags:  wages, government, public-sector pay, collective bargaining, manufacturing, Public sector, private sector, competitiveness

Gross trade accounting: A transparent method to discover global value chain-related information behind official trade data: Part 2

Zhi Wang, Shang-Jin Wei, Kunfu Zhu 16 April 2014

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Analytical background

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Topics:  International trade

Tags:  competitiveness, globalisation, trade, comparative advantage, global value chains, global supply chain, statistics

Tracking the causes of Eurozone external imbalances: New evidence

Jose Luis Diaz Sanchez, Aristomene Varoudakis 06 February 2014

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The Eurozone sovereign debt crisis, triggered by the 2008–09 global financial crisis, exposed macroeconomic imbalances in member countries that had accrued gradually following the advent of the euro in 1999. The growing current-account deficits in the Eurozone periphery and surpluses in the core were a main symptom of these imbalances (Figure 1).1 These patterns of intra-Eurozone current-account imbalances led to the accumulation of large external debts in the Eurozone periphery, matched by growing claims held by commercial banks in the core.

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Topics:  International finance

Tags:  competitiveness, eurozone, global imbalances, global financial crisis, European sovereign debt crisis

Going beyond the mystery of Italy’s price-competitiveness indicators

Claire Giordano, Francesco Zollino 18 July 2013

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Assessing Italy’s price competitiveness is becoming a puzzling challenge. Among others, Paul Krugman (2012) has questioned the reliability of the Italian cost-based indicators pinpointing their links with the “[country’s] mysterious productivity collapse”. Bayoumi et al. (2011) also claimed that “[w]hile Italy’s competitiveness does appear to have eroded [since 1995], the size of this effect is, frankly, anyone’s guess”.

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Topics:  Exchange rates International trade

Tags:  Italy, competitiveness, economic indicators

The roots of the Italian stagnation

Paolo Manasse 19 June 2013

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Italy is currently facing its worst recession in recent history, having lost about 8.5% of GDP between 2007 and 2013. The current situation is, to a large extent, the result of the Eurozone crisis and of the tough fiscal-austerity measures introduced across Europe, and particularly in Italy. Since 2007, the Italian primary balance improved by 3.3 points of potential GDP according to the OECD, almost exclusively through tax increases.

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Topics:  Europe's nations and regions

Tags:  Italy, competitiveness, Eurozone crisis

European imbalances

Hans-Werner Sinn, Akos Valentinyi 09 March 2013

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Europe is in the grip of three interrelated crises: a balance-of-payments crisis, a sovereign-debt crisis and a banking crisis. Policymakers have primarily focused on the sovereign-debt and banking crises. However, a credible strategy for getting the Eurozone back on track needs to address the problem of its large internal imbalances. Rebalancing will require countries with current-account deficits to devalue. The crucial question is how: internally without exiting the euro or externally after exiting the euro.

Imbalances in the euro area

Figure 1.

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Topics:  Europe's nations and regions

Tags:  competitiveness, imbalances, devaluation, Eurozone crisis

The Brazilian competitiveness cliff

Otaviano Canuto, Matheus Cavallari, José Guilherme Reis 27 February 2013

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The Brazilian economy is facing considerable competitiveness challenges (Bonelli and Pinheiro 2012). After several years of strong expansion, the recent slowdown seems related to supply-side difficulties stemming from a wide range of inefficiencies and rising costs, rather than insufficient aggregate demand. Such inefficiencies and costs have increasingly burdened economic activity and have shown signs of worsening in recent years.

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Topics:  International trade Monetary policy

Tags:  competitiveness, capital controls, BRICs, MIST

Why do large movements in exchange rates have small effects on international prices?

Mary Amiti, Oleg Itskhoki, Jozef Konings 19 February 2013

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Exchange rate moves have surprisingly small effects on prices. This apparent ‘disconnect’ is one of the central puzzles in international macroeconomics. It is also a continual headache for policymakers who rely on exchange rates to accommodate the adjustment of global (current account) imbalances. The main mechanism is a change in relative prices that shifts expenditure towards countries whose currency has depreciated. If prices don’t respond sufficiently to exchange rates then neither do quantities, and the expenditure-switching role of exchange rates is diminished (see Engel 2003).

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Topics:  Exchange rates

Tags:  competitiveness, euro, exports, imports, Eurozone crisis

Value-added exchange rates

Rudolfs Bems, Robert Johnson 06 December 2012

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Real effective exchange rates (REERs) are widely used to gauge competitiveness. Yet conventional REERs, based on gross trade flows and consumer price indexes (CPIs), are not well suited to that role when imports are used to produce exports – i.e., with vertical specialisation in trade.

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Topics:  Competition policy Global economy International trade

Tags:  competitiveness, Germany, global imbalances, China, globalisation, trade, supply chains, iPhone

Export shares, price competitiveness and the ‘Spanish paradox’

Miguel Cardoso, Mónica Correa-López, Rafael Doménech 24 November 2012

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Since the launch of the euro, Spanish exporters have been successful in containing the loss of their export share in world markets. This is in contrast to several advanced economies that have experienced significant losses as a result of globalisation and the gain of exports shares by many emerging countries. From 1999 until 2011, Spain lost 8.9% of her export share, a relatively modest figure in comparison to the record of other large producers (for instance France lost -40.5%; the UK -39.2%; Italy -32.1%; US -31.9%; and, more modestly, Germany -12.2%).

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Topics:  Europe's nations and regions International trade

Tags:  competitiveness, Spain, export market shares

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