Republic of Poland: Selected Issues
Author: International Monetary Fund
Publication Date:
26 Jul 2004
eISBN:
9781451831924
Language:
English
Keywords:
ISCR; CR; high-volatility regime; volatility; T-bond; investor; vis-à-vis emerging market competitor; CIS export market; market shares; labor-intensive export; capital-intensive export; Exports; Manufacturing; Emerging and frontier financial markets; Competition; Export performance
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This Selected Issues paper analyzes the main factors underlying the evolution of competitiveness, export performance, and labor market developments in Poland. The paper seeks to identify key questions of relevance for policymaking. The overall evolution of competitiveness compared with Poland’s trading partners and competitors since 1995 is analyzed using standard measures of the real effective exchange rate (REER). This paper also examines the role of foreign investors in financing domestically issued public debt in Poland.

Abstract

This Selected Issues paper analyzes the main factors underlying the evolution of competitiveness, export performance, and labor market developments in Poland. The paper seeks to identify key questions of relevance for policymaking. The overall evolution of competitiveness compared with Poland’s trading partners and competitors since 1995 is analyzed using standard measures of the real effective exchange rate (REER). This paper also examines the role of foreign investors in financing domestically issued public debt in Poland.

I. Assessment of Competitiveness1

A. Introduction

1. Poland’s external competitiveness has undergone substantial shifts in response to long-term underlying trends and exogenous shocks over the past decade. Economic restructuring and privatization associated with the transition changed the country’s productive capacity and export potential. The 1998 Russia crisis accelerated the process of restructuring, as exporters sought to penetrate European Union (EU) markets following the collapse of demand in Commonwealth of Independent States (CIS) countries. These structural changes have been accompanied by a process of productivity catch-up with respect to advanced countries, labor shedding, and rising unemployment. While similar trends have been occurring elsewhere in Central Europe as well, their combination with labor market rigidities and the persistence of high unemployment in Poland pose a special challenge for policymaking.

2. This paper discusses the main factors underlying the evolution of competitiveness, export performance and labor market developments and seeks to identify key questions of relevance for policymaking. The structure of the paper is as follows. The overall evolution of competitiveness compared to Poland’s trading partners and competitors since 1995 is analyzed using standard measures of the real effective exchange rate (REER) (Section B). To assess Poland’s competitiveness vis-à-vis countries at a broadly similar stage of development, special attention is then paid to measures of competitiveness in relation to emerging market competitors (Section C). Changes in competitiveness are mirrored in export performance, profitability, and shifts in the geographical orientation of exports and market shares—topics addressed in Section D. The ongoing structural changes in the economy have also changed the product structure and input content of exports, which, in turn, have hurt the labor market (Section E). Section F offers conclusions and policy recommendations to alleviate the impact of these changes on the labor market.

B. Measures of Competitiveness

3. There is no clear evidence that Poland’s current competitiveness is substantially different from that of the mid-1990s when the current account deficit was low and export growth strong (Figure 1).2 Standard measures of consumer price index (CPI)- and producer price index (PPI)-based REER show cumulative real appreciations of 15 percent and 5 percent, respectively between January 1995 and January 2004.3 Real appreciation can be expected during the transition period, and, to the extent that it can be explained by equilibrium effects, it does not indicate a deterioration of competitiveness. Indeed, the annual average rate of real appreciation (1.9 percent for the CPI-based REER and 0.9 percent for the PPI-based REER) is broadly comparable to the estimates of the Balassa-Samuelson effect for Poland, which range from 1.2 to 1.5 percent per annum (Kovacs, 2002). That the unit labor cost (ULC)-based REER depreciated by 17 percent during the same period further substantiates this view. Other factors, such as changes in administrative prices, constituting about one-fifth of the CPI basket, could also have induced an appreciation of the CPI-based REER but would not necessarily imply a loss in competitiveness.

Figure 1.
Figure 1.

Poland: Real Effective Exchange Rate Vis-à-vis Trading Partners, Measures and Determinants, 1995-2004 1/

(2000 = 100)

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: INS; IFS; UN Common Database (UNCDB); UN Comtrade; and IMF staff calculations.1/ For the list of countries comprising the trading partner group, see Table 1.2/ NBP reference rate minus U.S. Federal Funds rate; in percentage points.

4. Real appreciation did not follow a smooth path and three distinct subperiods have emerged during the past nine years:

  • First, during 1995–2000, the average annual appreciations of 4.8 percent and 2.5 percent for CPI- and PPI-based REERs, respectively, were above estimates of the Balassa-Samuelson effect for Poland. This outcome and the contemporaneous ULC-based REER appreciation of 4.7 percent per year suggest some deterioration of competitiveness.

  • Second, between end-2000 and end-2001, competitiveness worsened substantially. All measures of the REER (and of the nominal effective exchange rate (NEER)) appreciated by about 10 percent, partly in response to a sharp tightening of monetary policy from late 1999 through early 2001. Strong capital inflows related to FDI and convergence plays also contributed to the NEER appreciation during this period.

  • Third, since early 2002, both the NEER and the REER have depreciated considerably (13 percent in terms of the CPI-based REER, 9 percent for the PPI-based REER, and 23 percent for the ULC-based REER), aided by the substantial monetary easing that began in early 2001 and coinciding with the depreciation of the U.S. dollar vis-à-vis the euro.4 Since 2003, deteriorating expectations regarding prospects for fiscal adjustment also contributed to NEER depreciation. The notable improvement of Poland’s competitiveness during this period was reflected in booming exports and rising profit margins for exporters.

5. The stylized facts about competitiveness are robust to the choice of methodology used to calculate the weights of the REER (Figure 2). Two different approaches are used in this paper. The standard approach uses weights based on the value of Poland’s bilateral trade with individual trading-partner countries. The second, alternative methodology reflects the idea that, while Poland may have little or no direct trade with a particular country, it may be competing with that country in exports to third markets. The alternative weights are therefore based on competitor-countries’ export values in categories that represent Poland’s most important exports (Appendix I). The composition of the countries, as well as their weights, in the two methodologies naturally differs (Table 1). For example, the alternative calculation includes several emerging markets that are not among Poland’s trading partners and are therefore not part of the standard weights. Nevertheless, given the large share of euro area countries in both methodologies (52 percent of Poland’s trading partners and 35 percent of competitors), the results based on standard and alternative REER measures are broadly similar.

Figure 2.
Figure 2.

Poland: REER Vis-à-vis Trading Partners and Competitors, 1995-2004 1/

(2000 = 100)

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: INS; IFS; UN Common Database (UNCDB); UN Comtrade; and IMF staff calculations.1/ For the list of countries comprising the trading partner and competitor groups, see Table 1.
Table 1.

Poland: Countries Included in REER Calculations

article image
Sources: INS; IFS; UN Common Database (UNCDB); UN Comtrade; and IMF staff calculations.

Before 2000, weights differ because Czech Republic, Indonesia, Romania, and Ukraine are excluded from calculations.

C. Poland’s Competitiveness vis-à-vis Emerging Market Competitors

6. How competitive is Poland with respect to other countries at a broadly similar stage of development? This is relevant to assess competitiveness with respect to not only trade but also investment decisions on the location of production. Therefore, the analysis below focuses on a group of actual emerging market competitors obtained by excluding all advanced countries (and thus also all euro area countries) from the list of competitor countries. Their weights are derived by using the alternative methodology described in Appendix I. (Table 1 has the list of countries and their weights used in this calculation).

7. Poland’s competitiveness vis-à-vis emerging market competitors has somewhat deteriorated over the past nine years, despite the sharp improvement since 2002. (Figure 3). The CPI-based REER using the alternative weights and excluding all advanced countries has appreciated by 15 percent since early 1995. While empirical estimates of the Balassa-Samuelson effect for Poland are only available with respect to advanced countries, the cumulative ULC-based REER appreciation of 8 percent during the same period suggests that the real appreciation vis-à-vis emerging market competitors is unlikely to be entirely the result of equilibrium effects. Therefore, Poland’s competitiveness seems to have worsened with respect to other emerging markets. It appears that movements in the NEER to a large degree coincided with movements in the REER over extended periods of time until end-2001. However, since early 2002, the ULC-based REER has depreciated despite the NEER appreciation. Nevertheless, the improvement in competitiveness vis-à-vis emerging market competitors has been more moderate than vis-à-vis all competitors.

Figure 3.
Figure 3.

Poland: REER Vis-à-vis All and Emerging Market Competitors, 1995-2004 1/

(2000 = 100)

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: INS; IFS; UN Common Database (UNCDB); UN Comtrade; and IMF staff calculations.1/ For the list of countries comprising the competitor and emerging market competitor groups, see Table 1.

8. Nominal wage developments appear to have strongly influenced competitiveness (Figure 4). A breakdown of relative unit labor costs into relative wages, relative productivity, and the NEER suggests that relative nominal wages grew much faster than relative productivity in the late 1990s, when Poland’s competitiveness vis-à-vis its competitors deteriorated. The similar pattern can be observed in Poland’s own wage and productivity growth. While rapid productivity growth occurred during the transition period as restructuring and privatization led to job shedding, wage growth appears to have been more rapid than was sustainable. Restructuring and labor shedding in Polish industries accelerated following the 1998 Russia crisis, further speeding up relative productivity growth. At the same time, rapidly rising unemployment in Poland helped curtail wage growth and led to a substantial decline in relative wages and ULCs in local currencies. However, the NEER appreciation somewhat mitigated the improvement of Poland’s dollar-denominated ULCs vis-à-vis its emerging market competitors.

Figure 4.
Figure 4.

Poland: Manufacturing Wages, Productivity, NEER, and Unemployment, 1996-2003

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: Polish authorities; INS; IFS; UN Common Database (UNCDB); UN Comtrade; and IMF staff calculations.1/ For the list of countries comprising emerging market competitor group, see Table 1.

D. Overall Export Performance, Profitability and Market Penetration

9. Poland’s export performance since 1995 has been uneven, reflecting swings in competitiveness and exogenous shocks (Figure 5). The robust real growth of exports in the mid-1990s confirms that the initial levels of competitiveness were probably adequate or even strong. In the late 1990s, however, export growth took a hit in response to two exogenous shocks: the collapse of the CIS export markets following the 1998 Russia crisis, and the economic slowdown in the EU in 2001. Export growth has recovered since late 2002, as the continuing zloty depreciation against the euro and the ensuing NEER depreciation have helped improve competitiveness. The FDI investments undertaken in the late 1990s (including in special economic zones) began to bear fruit in subsequent years. Poland’s export-to-GDP ratio has increased (albeit starting from a very low base) by 11 percentage points since 1993—substantially less than in some of the other Central European Countries (CECs), such as Hungary (36 percentage points) and Slovakia (23 percentage points).

Figure 5.
Figure 5.

Poland and Other CECs: Exports of Goods and Services, 1995-2003

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: WEO; and IMF staff calculations.

10. The profitability of Polish exports has closely reflected developments in competitiveness and overall export performance (Figure 6). Both direct measures of profitability (the gross profit-to-revenue ratio) and indirect measures (the export unit value-to-ULC and export unit value-to-PPI ratios) indicate that, when competitiveness has deteriorated, exporters have squeezed their profit margins in an attempt to preserve their market shares. In the past two years, export profitability has improved as a result of the restructuring of the late 1990s and the more recent depreciation of the zloty that has provided large gains for exporters. The exchange rate is well above the breakeven point of profitability reported by enterprises, and exporters are now substantially more profitable than nonexporters. Overall, the export sector has been a driving force of economic growth in the past two years.

Figure 6.
Figure 6.

Poland: Profitability of Exports, 1996-2003

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: Polish authorities; and IMF staff calculations.

11. Poland has successfully expanded its export share in the EU market. Poland’s gains in the EU’s market share since 1993 have been smaller that those of some other CECs and China but have exceeded the gains of other competitor countries (Table 2). However, Poland and the CECs have gained little market share in other major markets, such as the United States. These patterns highlights the importance of factors other than changes in competitiveness. First, Poland and the other CECs have benefited from bilateral Europe Agreements with the EU concluded between 1993 and 1995, which established free trade areas covering most products following a phase-in period. In contrast, the EU has liberalized trade restrictions only more recently vis-à-vis some Asian and Latin American emerging markets, such as China and Mexico.5 (Mexico rapidly increased its exports to the United States after launching of the North American Free Trade Agreement (NAFTA)). Second, the rapid increase in the export market shares of China reflects the increasing vertical specialization of production within Asia, where China imports goods mainly from the region for processing and reexport (often to the EU) (Prasad, 2004).

Table 2.

Poland and Emerging Market Competitors-Export Market Shares in the EU and the US

(in percent of total)

article image
Source: DOTS.

Excluding intra-EU trade.

E. Product Structure and Input Content of Exports, and Labor Market Implications

12. Underlying structural changes in the economy, compounded by exogenous factors, have changed the product composition of exports (Figure 7). Like other transition economies, Poland inherited a large industrial sector relative to overall GDP and an underdeveloped service sector (Landesmann and Stehrer, 2003). The trade structure in the early 1990s was influenced by participation in the Council for Mutual Economic Assistance (CMEA), under which the CIS countries provided mainly raw materials in exchange largely for manufactured good exported by other CMEA members, including Poland. Liberalization since the early 1990s has prompted a decline in the share of industry in output and employment, and a change in the export potential of different sectors. The permanent loss of export markets in the CIS countries following the 1998 Russia crisis exacerbated these underlying trends. The subsequent successful reorientation of exports toward the EU has necessitated demand-driven changes in the product structure of exports.

Figure 7.
Figure 7.

Poland: Export Structure by Main Product Categories, 1993-2002

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: UN Comtrade database; and IMF staff calculations.

13. Foreign direct investment (FDI) inflows have been instrumental in changing the product structure. At the beginning of the transition, much of the existing stock of capital turned out to be obsolete and nonviable in the conditions of a market economy and inadequate for the expansion of exports to advanced countries. FDI inflows to transition economies (mainly from the EU), both in the form of privatization and greenfield investment, play an important role in upgrading technology, improving organizational capacity and product quality, expanding new production, and creating export capacities (Hunya, 2000 and 2002). The importance of FDI in Poland is visible at the sectoral level: for example, the most rapid increase was in the share of exports of machinery and transport equipment—the sector that received the largest part (one-fourth) of all FDI inflows in manufacturing, between 1993 and 2003.

14. Changes in the product structure of exports have implied a shift in input requirements. These changes can be illustrated by dividing exports into three broad groups: (i) low tech or labor intensive, (ii) resource intensive, and (iii) medium to high tech (Box 1, Taxonomy 1 in Table 3, and top panel of Figure 8).6 Since 1993, the initially large share of resource-intensive and low-tech and labor-intensive exports inherited from the CMEA has declined. The share of medium to high tech exports has increased rapidly and now exceeds one half of the total. A similar picture emerges from an alternative and more detailed classification of exports (lower panel of Figure 8). In this methodology, exports are divided into five groups: (i) capital intensive, (ii) labor intensive, (iii) mainstream manufacturing, (iv) marketing driven, (v) technology driven (Box 1 and Taxonomy 2 in Table 3).7 While the share of capital-intensive exports in total exports declined quite rapidly, the share of labor-intensive exports remained broadly stable through 1999 but diminished thereafter. The share of mainstream manufacturing exports has increased rapidly since 1998, while the share of technology-driven exports has increased only slightly.

Figure 8.
Figure 8.

Poland: Composition of Exports by Factor Input Requirement, 1993-2002 1/

(In percent of total)

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: UN Comtrade database; and IMF staff calculations.1/ For classification of exports by factor input, see Box 1 and Table 3.
Table 3.

Classification of Export Categories by Factor Inputs and Labor Skill Requirements

article image
Sources: UN Comtrade database; Taxonomy 1 is based on Landesmann and Stehrer (2003); Taxonomy 2 and Taxonomy 3 are based on Peneder (1999).

Classification of Manufacturing Industries by Factor Inputs and Labor Skill Requirements

Landesmann and Stehrer (2003) present a simple classification of manufacturing industries by factor inputs (Taxonomy 1 in Table 3). Low-tech and labor-intensive industries include food products, beverages and tobacco, textiles and textile products, and leather and leather products. Resource-intensive industries include wood and wood products, coke, refined petroleum products and nuclear fuel, chemicals, chemical products and manmade fibers, and other nonmetallic mineral products. Medium-to high-tech industries include machinery and equipment, electrical and optical equipment, and transport equipment.

Peneder (1999 and 2001) devised taxonomies that group individual industries according to their typical combination of factor inputs (Taxonomy 2) and their different requirements for skilled labor (Taxonomy 3). These are applied to the three-digit NACE classification of manufacturing industries. Taxonomy 2 reflects the distinction between (i) exogenously given competitive advantage based on factor endowments, such as physical capital and labor, and (ii) endogenously created advantages based on purposeful investment in intangible assets, such as marketing and innovation. It comprises five mutually exclusive groupings of mainstream manufacturing, labor-intensive, capital-intensive, marketing- driven and technology-driven industries. Taxonomy 3 groups industries by their relative skill requirements, and comprises low-skill, medium-skill blue-collar, medium-skill white-collar, and high-skill industries.

In this paper, these taxonomies are applied to the two-digit SITC (revision 3) classification of exports used in the UNCTAD Comtrade database. For export product categories where the correspondence between the NACE three-digit and the SITC two-digit classification was imperfect, a judgment was made about factor inputs and labor skills. The mapping of the industry classifications to exports is summarized in Table 3.

15. The structure of exports in terms of labor-skill requirements has also changed dramatically (Figure 9). To demonstrate this, export categories are divided into four groups: (i) low-skill, (ii) medium-skill blue-collar, (iii) medium-skill white-collar, and (iv) high-skill industries (see Box 1 and Taxonomy 3 in Table 4).8 The most striking result is the sharp fall in the share of exports requiring low-skill labor, in contrast to the increase in the share of medium-skill labor-intensive exports. The stable share of high-skill labor exports at a low level appears consistent with the modest increase in the share of technology-driven exports. These trends, together with the sharp increase in unemployment since 1999, suggest the possibility of skill mismatches between labor demand and labor supply.

Figure 9.
Figure 9.

Poland: Composition of Exports by Labor Skills, 1993-2002 1/

(In percent of total)

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: UN Comtrade database; and IMF staff calculations.1/ For classification of export by labor skill requirements, see Table 3.
Table 4.

Classification of Manufacturing Subsectors by Factor Inputs and Labor Skill Requirements

article image
Sources: Poland Statistical Yearbook; Taxonomy 2 and Taxonomy 3 are based on Peneder (1999).

16. The impact of these structural changes on the labor market has been profound. The fall in the share of low-tech and labor-intensive exports and low-skill exports has contributed to the rapid decline in employment. Evidence from corporate sector surveys suggests that, between 1999 and 2003, employment in export-oriented firms decreased by 31 percent, compared with a 13 percent increase in nonexporting firms (Figure 10). The rising structural unemployment rate, which is now estimated at about 15 percent, suggests that an increased skill mismatch resulting from the restructuring process is playing a role (Estevao, 2003). With the overall unemployment rate hovering around 20 percent and the unemployment rate among low-skill workers at about 30 percent, these trends pose a challenge for policymakers.

Figure 10.
Figure 10.

Poland: Cumulative Change in Corporate Sector Employment, 1999-2003

(In percent)

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: Polish authorities; and IMF staff calculations.

17. The increase in unit labor costs has probably played an important role in reducing the share of low-tech and labor-intensive and low-skill exports. As discussed in Section C, the ULC- based REER for the manufacturing sector has appreciated since the mid-1990s, particularly vis-à-vis emerging market competitors, with a substantial improvement in the past two years. However, this average measure for the manufacturing sector as a whole masks differences across industries. To illustrate the relationship between competitiveness and export growth on a sectoral level, Polish industries making up the manufacturing sector are grouped by factor inputs and labor skill requirements (Table 4).9 For each group of industries, the cumulative increase in ULCs and their components (wages and productivity) between 1995 and 2002 is compared to export value growth during the same period (Figure 11). The weak growth of labor-intensive and low-skill manufacturing exports, combined with the relatively rapid growth of ULCs, points to decreasing competitiveness of the cost structure in these two groups relative to other groups, assuming broadly similar developments in prices. This suggests that producers had incentives to shed employment in an attempt to limit rising labor costs. Several studies present evidence that this process of labor shedding in labor intensive industries is exacerbated by the constraint of the minimum wage on downward wage movements (World Bank, 2004). At the same time, reabsorption in the higher productivity sectors could be constrained by skill mismatches and high benefits for some categories of the unemployed (OECD, 2004; and World Bank, 2004).10

Figure 11.
Figure 11.

Poland: ULC, Wages, Productivity and Exports in Manufacturing Subsectors, 1995-2002

(Cumulative change; in percent)

Citation: IMF Staff Country Reports 2004, 218; 10.5089/9781451831924.002.A001

Sources: Polish authorities, UN Comtrade database; and IMF staff calculations.1/ For classification of subsectors by factor inputs and labor skills, see Table 4.

F. Conclusions

18. The analysis in this paper suggests that Poland’s overall competitiveness is broadly adequate. Booming export volume growth, strong profitability, and increasing penetration in EU markets are clear signs of this. Yet the path since the mid-1990s has not been smooth. After a sizable real appreciation during 1995–2001 across the measures of competitiveness, which took a toll on exports, output and employment, wage moderation together with nominal depreciation have restored lost competitiveness.

19. At a sectoral level shifts in competitiveness have contributed to substantial changes in the structure of production and, in turn, to labor shedding and unemployment. The transition and increasing competition from other emerging markets, have led to a loss of exports and employment in labor-intensive and low skill-intensive sectors. While other sectors have taken up some of these displaced workers, particularly in the past 1–2 years, the reabsorption has not been complete. Unemployment which rose rapidly during 1999–2003 therefore remains high. While this may reflect temporary frictions in the transition, it is likely that skill mismatches and insufficient wage flexibility have also contributed. In this environment, it will be important to pursue labor market and structural policies aimed at providing adequate training and minimizing labor market rigidities. With high estimates of structural unemployment, visible improvement may nevertheless be gradual.

References

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  • Kovacs, M. A., 2002, “On the Estimated Size of the Balassa-Samuelson Effect in Five Central and Eastern European Countries,” NBH Working Paper 2002/5 (Budapest, Hungary: Magyar Nemzeti Bank, Economic and Research Department).

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APPENDIX I STANDARD AND ALTERNATIVE METHODOLOGIES FOR CALCULATING THE REER

The standard methodology used at the IMF and described in Zanello and Desruelle (1997) defines REER indicators as a weighted geometric average of the level of the CPI, PPI, or ULCs in a country under consideration relative to its trading partners. Specifically, the REER indicator for Poland is given by

(1)REER = Πj=1N⁢ [PpPj⁢RpRj]Wj

where j = 1…, N indicates Poland’s trading partners, Wj is country j’s weight in Poland’s competitiveness, Pp and Pj are CPI, PPI, or ULC indices in Poland and in country j, and Rp, and Rj represent the nominal exchange rates of the Polish zloty and country j’s currency in U.S. dollars.

The weighting scheme used in the computation of the REER indices is based on bilateral trade in manufactures, non-oil primary commodities, and, for a set of 46 countries and regions, tourism services. For each of these categories of goods, separate weights are computed. These weights are then aggregated to derive country j’s overall weight in Poland’s competitiveness, Wj. Specifically,

(2)wj = αp⁢(M)⁢wj⁢(M) + αp⁢(P)⁢wj⁢(P) + αp⁢(T)⁢wj⁢(T)

where Wj (M), Wj (P), and Wj (T) are weights based on trade in manufactures, primary commodities, and tourism services.11. The factors αp (M), αp (P), and αp (T) are the shares of trade in manufactures, primary commodities, and tourism services in Poland’s external trade.

Trade data on manufactured goods cover all commodities under the one-digit SITC numbers 5–8 for 1988–1990, obtained from the UN COMTRADE database. Data on trade of primary commodities are obtained from the same source, and data on tourism services are from the Yearbook of Tourism Statistics, published by the World Tourism Organization.

The alternative methodology defines REER indicators as a weighted geometric average of the level of the CPI, PPI, or ULCs in Poland relative to its competitors. The REER is again obtained by equation (1). However, the alternative weights wj* for each competitor country differ from the standard weights and were derived in the following way. Poland’s main export product categories xi (based on a 2-digit SITC classification from the UN COMTRADE database) were identified (these products account for about 90 percent of the U.S. dollar value of Poland’s exports in 2002 and are listed in Appendix Table). Countries that are the world’s largest exporters of these product categories were defined as Poland’s competitors (these competitors jointly account for about 75 percent of world trade in each product category). Competitor j’s weight wj* is then calculated as the sum of country j’s U.S. dollar value of exports for all identified export product categories xi, weighted by the share of each product category in Poland’s exports αi. Specifically,

(3)wj* = Σi=1m⁢αi⁢xijΣi=1m⁢Σj=1k⁢xij

where αi is the share of export category xi in Poland’s exports, i = (1, m) and ∑i=1mαi=1; xij is competitor j’s export of product xi, j = (1, K), where K is the total number of competitors.

Appendix Table.

Poland: Exports by Main Export Categories

article image
Sources: UN Comtrade database; and IMF staff calculations.

For the list of countries and their weights in each methodology, see Table 1.

1

Prepared by Zuzana Murgasova.

2

For a discussion of the conceptual foundations of standard measures of competitiveness, see Lipschitz and McDonald (1991).

3

The analysis in the paper covers the period starting from 1995 for two reasons: (i) the hyper-inflation of the early 1990s was clearly over by 1995 and (ii) and data availability for some other countries is limited prior to 1995.

4

Empirical evidence suggests that the U.S. dollar-euro exchange rate significantly influenced the Polish zloty-euro rate (Panthaki, 2004).

5

For a more detailed discussion of these issues, see Messerlin (2001).

6

This classification of export products broadly follows the classification of industries in Landesmann and Stehrer (2003).

7

This classification of export products is drawn from Peneder (1999 and 2001).

8

This classification is drawn from Peneder (1999 and 2001).

9

This analysis includes only Poland, as the necessary data for all other competitors are not available.

10

For a more detailed discussion on labor markets in Poland, see Estevao (2003).

11

For more details on definition of these weights, see Zanello and Desruelle (1997).

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Cover IMF Staff Country Reports
Republic of Poland: Selected Issues
Author: International Monetary Fund
Volume/Issue:
Volume 2004: Issue 218
Publisher:
International Monetary Fund
ISBN:
9781451831924
ISSN:
1934-7685
Pages:
65
DOI:
https://doi.org/10.5089/9781451831924.002
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    Poland: Real Effective Exchange Rate Vis-à-vis Trading Partners, Measures and Determinants, 1995-2004 1/

    (2000 = 100)

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    Poland: REER Vis-à-vis Trading Partners and Competitors, 1995-2004 1/

    (2000 = 100)

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    Poland: REER Vis-à-vis All and Emerging Market Competitors, 1995-2004 1/

    (2000 = 100)

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    Poland: Manufacturing Wages, Productivity, NEER, and Unemployment, 1996-2003

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    Poland and Other CECs: Exports of Goods and Services, 1995-2003

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    Poland: Profitability of Exports, 1996-2003

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    Poland: Export Structure by Main Product Categories, 1993-2002

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    Poland: Composition of Exports by Factor Input Requirement, 1993-2002 1/

    (In percent of total)

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    Poland: Composition of Exports by Labor Skills, 1993-2002 1/

    (In percent of total)

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    Poland: Cumulative Change in Corporate Sector Employment, 1999-2003

    (In percent)

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    Poland: ULC, Wages, Productivity and Exports in Manufacturing Subsectors, 1995-2002

    (Cumulative change; in percent)

Poland: Real Effective Exchange Rate Vis-à-vis Trading Partners, Measures and Determinants, 1995-2004 1/

(2000 = 100)

Poland: REER Vis-à-vis Trading Partners and Competitors, 1995-2004 1/

(2000 = 100)

Poland: REER Vis-à-vis All and Emerging Market Competitors, 1995-2004 1/

(2000 = 100)

Poland: Manufacturing Wages, Productivity, NEER, and Unemployment, 1996-2003

Poland and Other CECs: Exports of Goods and Services, 1995-2003

Poland: Profitability of Exports, 1996-2003

Poland: Export Structure by Main Product Categories, 1993-2002

Poland: Composition of Exports by Factor Input Requirement, 1993-2002 1/

(In percent of total)

Poland: Composition of Exports by Labor Skills, 1993-2002 1/

(In percent of total)

Poland: Cumulative Change in Corporate Sector Employment, 1999-2003

(In percent)

Poland: ULC, Wages, Productivity and Exports in Manufacturing Subsectors, 1995-2002

(Cumulative change; in percent)