Price and non-price competitiveness in export demand: empirical evidence from Italy

This study aims at providing an overview of recent developments in the export performance and international competitiveness of Italy. Using a flexible approach based on a structural time series model, I have assessed the extent to which price competitiveness and non-price competitiveness affect Italian export behaviour. The results of analysis reveal that Italy has experienced a shift to the left of its export demand, which suggests a decline in the country's international competitiveness since the mid-1990s. More specifically, a 1 percent drop in price competitiveness has contracted Italian export volumes by 0.8 percent, while a 1 percent decrease in non-price competitiveness has narrowed export volumes by 2.9 percent. Altogether, these and other findings indicate that erosion to non-price competitiveness plays a role more significant than price in affecting export performances.