Christoph Fischer, Oliver Hossfeld, Karin Radeck

• We discuss the relative merits of various indicators of international price competitiveness from a conceptual point of view, and empirically check which indicator serves best to predict real exports in the long run. To this end, a panel cointegration analysis is conducted, augmented by a forecast exercise. In the latter, repeated sampling techniques are used in order to avoid arbitrary sample splits. In line with the theoretical reasoning, we find that broad price- and cost-based indicators are to be preferred to narrow price-based measures such as CPI- or PPI-deflated real exchange rates. Furthermore, the evidence points towards using world trade as external activity variable instead of GDP- or real imports-based measures.