Assessing Competitiveness and Real Exchange Rate Misalignment in Low-Income Countries

Assessing a country''s competitiveness routinely starts with an analysis of the real exchange rate. However, in low-income countries, empirical analysis of the real exchange rate is often subject to important limitations that seriously weaken the results. This paper summarizes the methodologies used to assess real exchange rate misalignments and discusses the range of obstacles common to low-income countries. Recognizing the importance of using a wide range of indicators for assessing competitiveness in low-income countries, the paper discusses alternative competitive measures and then proposes a template of indicators to allow for a systematic assessment of competitiveness in low-income countries. The template is then used to rank countries according to their competitiveness performance in 2006.Export competitiveness;Real effective exchange rates;Low-income developing countries;reer, exchange rate, export volume, exchange rates, real exchange rate, export sector, export market shares, export market, global competitiveness, real exchange rates, oil exports, capital flows, exchange rate misalignments, real exchange rate misalignments, nominal exchange rate, equilibrium exchange rate, export performance, current account balance, effective exchange rate, export volumes, oil exporting, real effective exchange rate, import prices, foreign exchange, effective exchange rates, market exchange rates, oil export, export growth, exchange rate level, nominal effective exchange rate, diversified export base, export good, export share, export sectors, share of exports, exchange rate misalignment, real exchange rate misalignment, exported good, open economy macroeconomics, export base, export structure, parallel exchange rates, multiple currency practices, commodity exporters, exporters, oil export volume, exportable ? goods, international markets, export unit, multiple exchange rate, world exports, parallel exchange rate, exchange rate data