Bank of Lithuania
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No 38

Non price competitiveness of Lithuanian exports

  • Abstract

    Foreign trade accounts for a significant part of Lithuania’s economy and the growth of export volumes is a common occurrence in Lithuania, even with rapidly growing wages. With a growth in Lithuania’s exports, the share of exports is also increasing. This indicates that Lithuanian-origin goods and services are competitive in the international market. The competitiveness of Lithuanian-origin exports may be of two kinds: based on the price and costs and based on other, non-price, factors. This article examines two methods of exports competitiveness calculation. When examining exports competitiveness based on the first method, standard formulation for the export equation, regressions are drawn up where exports growth is a dependent variable, whereas demand and the real effective exchange rates (reflecting the impact of prices and costs) are independent variables. Residual variance (i.e. random value) is seen as non-price factors that influence exports growth. When examining exports competitiveness based on the second method, exports of goods are analysed more closely, broken down into four competitiveness groups. The results indicate that the competitiveness of Lithuanian-origin exports in 2001-2019 was essentially determined by factors other than price or costs. In other words, the labour cost growth experienced by exporters is not a key factor that influences the competitiveness of Lithuanian-origin exports.

    The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

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