Policy Article

The importance of intermediates imports and non-price competitiveness for the German current account balance (original publication in German)

Kieler Beiträge zur Wirtschaftspolitik, 6

This study analyzes to what extent the rising share of foreign value added in exports and various factors of non-price competitiveness are related to exports and current account balances in the European Union and other large exporting economies. It also asks whether Germany is special with regard to these relationships. The results show that price competitiveness measured by the real effective exchange rate plays a subordinate role for explaining export performance. But the indicators applied to measure non-price competitiveness turn out to be insufficient. Hence, in order to properly identify effects of non-price competitiveness, the authors recommend analyzing it on a more disaggregated level, e.g. at the firm level.