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Revised competitiveness indicators for Austria reflect a comparatively stable competitiveness development of the Austrian
economy over the longer horizon
The effect of price-cost competitiveness on national exports and imports, and hence on the current account, is especially
important for open economies, in particular for small open economies. In Europe the issue of short-term price-cost competitiveness
gained specific prominence after the onset of the global crisis in 2008, although large external imbalances had been identified
even before 2008. Across the Euro system, various (harmonised) indicators are used to monitor and assess national short-term
price-cost competitiveness performance. In Austria, these indicators are compiled by the OeNB in cooperation with WIFO. National
competitiveness indicators need to be revised regularly to ensure that they adequately reflect changing country-specific trade
patterns, as the reliability of these indicators crucially depends on the weights of individual trading partners. In the current
release for Austria, which reflects external trade data for the period from 2010 to 2012, the basic conceptual framework was
left unchanged. A comparison of the country weights for six consecutive three-year periods, starting in 1995, that underly
the current release highlights the re-orientation of trade flows towards countries that joined the EU in 2004 and 2007 as
well as the rising importance of China as a destination for Austrian exports. The current revision of the competitiveness
indicators for Austria, as described here, indicates only small variations in Austria's international competitiveness since
2008. Another purpose of this article is to establish which of the various price-cost competitiveness indicators best reflects
our country's short-term price competitiveness. This is done by estimating standard export and import regressions and comparing
the in-sample and out-of-sample fit of models that differ only with respect to the respective real effective exchange rate
index. Performance indicators show that models including real effective exchange rates deflated by unit labour costs or by
producer prices create comparatively smaller estimation and forecast errors than those using the HICP/CPI.
Keywords:price and cost competitiveness, effective exchange rates, manufacturing and service sector TP_Wettbewerbsfaehigkeit_Produktion
Forschungsbereich:Makroökonomie und öffentliche Finanzen
Sprache:Englisch