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" , 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 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.
Pages
23
Format
ebook
Publisher
International Monetary Fund
Release
June 13, 2014
ISBN
1299661564
ISBN 13
9781299661561
Measuring Competitiveness: Trade in Goods or Tasks?
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" , 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 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.