Alberto Felettigh

Measuring the price elasticity of import demand in the destination markets of italian exports

We compare the price elasticity of import demand in the destination markets of Italian exports to the price elasticity in the destination markets of the other main euro-zone countries’ exports. We use the elasticities of substitution across varieties estimated for each destination market by Broda, Greenfield and Weinstein (2006). We find that Italy exports to markets that have, on average, lower price elasticity than the markets to which France, Germany and Spain sell their exports. The result is mainly driven by the motor vehicle and other transport equipment sectors. Net of these two industries, the average export elasticities of the four countries are basically identical. The sectoral and geographical composition of Italian exports therefore does not seem to expose them to a relatively more elastic demand, contrary to the indications found in part of the literature.

Market Shares and Trade Specialisation of France, Germany and Italy

The trade performances of France, Germany and Italy in the 1990s and 2000s have followed heterogeneous national patterns. Contrary to the Italian situation, French and German divergences cannot be explained by relative cost and price developments; geographical specialisation has a limited role in the differences between the three countries. Sectoral specialisation sheds some light to these divergences, emphasising the exposure of Italy to emerging country competition and the limited specialisation of France, while all three countries share a lack of specialisation in ICT products. Non-price competitiveness indicators, such as R&D or education levels, could also contribute to explain the German strength and Italian weakness.

New indicators to assess price-competitiveness developments in the four largest euro-area countries and in their main trading partners

This paper provides a new set of monthly price-competitiveness indicators for 62 countries, which are to be adopted by the Bank of Italy as its new official indicators. We employ updated trade weights that take into account the highly relevant competitive pressures of local producers in all outlet markets while guaranteeing a vast geographical coverage in international standards. We also assess price competitiveness with respective to different sub-groups of trading partners, namely euro-area vs. non euro-area countries. Focusing on the four largest economies in the euro area, in the period 1999-2014 Germany and Frances price competitiveness is found to have improved; it was roughly stable in Italy whereas it deteriorated in Spain.

Adjusting the External Adjustment: Cyclical Factors and the Italian Current Account

We investigate the role of cyclical factors in the adjustment of Italy’s external balance from 2010, developing a model that infers the potential levels of domestic demand and of imports and exports from an exogenous measure of potential output, in an internally coherent fashion and also taking composition effects into account. According to our results, in 2015 Italy’s cyclically-adjusted current account surplus came to about 0.5 percentage points of GDP; the overall external rebalancing of the Italian economy has largely been of a non-cyclical nature, with a positive contribution from the decline in the prices of energy commodities. By applying our methodology to the other major euro-area countries, we find that current account imbalances over the recent period are amplified when assessed in cyclically-adjusted terms.

Market shares in manufacturing value-added: is the picture different?

Using an extension of the methodology proposed by Koopman, Wang and Wei (2014) for quantifying the domestic value added in a country’s exports of manufactures, this paper provides calculations of the market shares in value-added for a number of countries and compares them with the standard shares in global gross exports. The data show different levels and dynamics between advanced and developing countries, with 2004 apparently marking a watershed. Focusing on the four main euro-area countries, the paper offers a sectoral interpretation for the falling intensity of the domestic value added in exports.

Trading Processing for Goods: A Different View from the Past on Italian Trade Flows?

The new international standards for national accounts and balance of payments statistics (ESA 2010 and BPM6) introduced a new treatment of goods sent abroad for processing without changing ownership, now considered as an exchange of services. In this paper we explore to what extent this innovation affects the structural analysis of Italian trade flows, in particular along the geo-sectoral dimension. We also draw, for the first time, a detailed picture of exports and imports of processing services in order to shed light on how Italian firms participate, through this channel, in global value chains. Our findings largely validate the geo-sectoral interpretations based on the previous statistical standards. The data reveal that Italy is historically a net exporter of processing services, especially for high-technology products; flows are highly concentrated across destinations and sectors.