Competitiveness in Central-Europe: What Has Happened Since EU Accession?
IMF Working Papers, June 1, 2009
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Bibliographic details
- Authors: Céline Allard
- Published: June 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451872682.001
Overview
- Focus: evolution of determinants of exports and imports in Central-Eastern Europe (CEE) over 2002-07 and their contribution to trade, with a view to assessing competitiveness developments.
- Context: Since EU accession, CEE experienced strong trade dynamics, continuous exchange rate appreciation, and rapid FDI inflows prior to the global turmoil referenced in the paper.
- Objective: Describe how determinants evolved and use econometric analysis to derive their contribution to trade up to 2007.
Key findings
- Trade and market position
- The global and domestic upswings, along with rising trade market shares, largely account for trade developments in CEE countries until 2007.
- Evidence points to continuous nonprice competitiveness gains over 2002-07.
- Exchange rates and competitiveness
- Exchange rate appreciation did not unduly weigh on export and import growth, suggesting most appreciation reflected an upward movement in its equilibrium value.
- Vulnerabilities
- Despite entering the global slowdown period from a strong competitiveness position, the crisis revealed the vulnerability associated with heavy reliance on global demand to a trade shock.
Methodology (as described)
- Period analyzed: 2002-07.
- Approach: Econometric derivation of contributions of determinants to exports and imports to assess competitiveness developments.
- Determinants considered (as described in summary): global demand/upswings, domestic upswings, trade market shares, exchange rate movements, FDI inflows.
Policy implications and interpretations
- Nonprice competitiveness gains matter: Rising trade market shares and strong global/domestic demand underpinned trade performance.
- Exchange rate assessment: Observed appreciation appears largely consistent with an upward shift in equilibrium exchange rates rather than a loss of price competitiveness.
- Risk management: Policymakers should be aware that strong integration with global demand can amplify vulnerability to external trade shocks.