Burgess, Robert, Stefania Fabrizio, and Yuan Xaio, 2004, “The Baltics. Competitiveness on the Eve of EU Accession,” (Washington: International Monetary Fund).
Cashin, Paul, Luis Cespedes, and Ratna Sahay, 2002, “Keynes, Cocoa, and Copper: In Search of Commodity Currencies,” Working Paper 02/223 (Washington: International Monetary Fund).
Clark, Peter, and Ronald MacDonald, 1999, “Exchange Rates and Economic Fundamentals: A Methodological Comparison of Beers and Feers,” in J. Stein and R. MacDonald (eds.) Equilibrium Exchange Rates (Kluwer: Boston), pp. 285-322.
Chinn, Menzie and Iro Hito, 2005, “Current Account Balances, Financial Development, and Institutions: Assaying the World’s “Savings Glut,” NBER WP 11761.
Cheung, Yin-Wong, Menzie Chinn, and Antonio García Pascual, 2002, “Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive?,” NBER Working Paper 9393.
Isard, Peter, Hamid Faruqee, Russell Kincaid, and Martin Fetherston, 2001, “Methodology for Current Account and Exchange Rate Assessments,” Occasional Paper 209 (Washington: International Monetary Fund).
Lane, Philip, and Gian-Maria Milesi-Ferretti, 2000, “The Transfer Problem Revisited: Net Foreign Assets and Real Exchange Rates,” Working Paper 00/12 (Washington: International Monetary Fund).
Lane, Philip, and Gian-Maria Milesi-Ferretti, 2006, “The External Wealth of Nations Mark II: Revised and Extended estimations of Net Foreign Assets and Liabilities 1970-2004,” Working Paper 06/69 (Washington: International Monetary Fund).
Loko, Boileau, and Tuladhar, Anita, 2005, “Labor Productivity and Real Exchange Rate: The Balassa-Samuelson Disconnect in the Former Yugoslav Republic of Macedonia”, Working Paper 05/113 (Washington: International Monetary Fund).
MacDonald, Ronald, and Luca Ricci, 2003, “Estimation of the Equilibrium Exchange Rate for South Africa,” Working Paper 03/44 (Washington: International Monetary Fund).
Pavia, Claudio, 2001, “Competitiveness and the Equilibrium Exchange Rate in Costa Rica,” Working Paper 01/23 (Washington: International Monetary Fund).
I want to thank Mark Griffiths, Lucca Ricci, Antonio Garcia Pascual, and the participants of a seminar in Skopje for their comments. All remaining mistakes are my own. Cristina Cheptea provided invaluable research and editing assistance. Odd Hanssen contributed to the section on indicators of structural competitiveness.
Competitiveness is an elusive concept, with many definitions in the economic literature. One of the most straightforward, used by the World Economic Forum, equates competitiveness with the ability of a country to achieve sustained high rates of growth in GDP per capita. A similar but more detailed definition, supplied by the OECD, is that competitiveness is the degree to which a nation can, under free trade and fair market conditions, produce goods and services that meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long-term.
The assumption is that in 2005 (when the cash exchange component of the recorded private transfers grew dramatically) the part representing transfers from migrants grew in line with remittances: the remainder is assumed to be capital account.
Similar results were obtained with an unpublished equation estimated by staff at the IMF Research Department.