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The recent Italy’s upward trend in real effective exchange rate (REER) combined with a remarkable decreasing market share has brought about a lively economic debate on the relevance of price factors in shaping export performances. In parallel, concerns of weak Italy export competitiveness have been raised in connection to the Eurozone imbalances issue. In this framework, the aim of this paper is to empirically investigate the role of price competitiveness in determining Italy export flows, namely the sensitiveness of export to REER dynamics. To this purpose we set forth an econometric investigation (a cointegration analysis from 1994 to 2014 to jointly estimate the long run export elasticities to foreign demand and REER) conducted on the basis of five price- and cost-competitiveness indicators (i.e., alternative deflators-based REERs) taking also into account the role of non-price competitiveness factors. Moreover, we disentangle export elasticities by clustering intra-Eurozone and global flows (both in values and in volumes). In addition to assess the remarkable importance of price competitiveness (long run export elasticity to export prices-based REER is about -1.3 for Eurozone flows and -1.7 for global flows), some robustness tests confirm the absence of significant changes in price elasticity of export with regard to the two sub-periods pinpointed by the inception of Euro. Furthermore, we provide a sectoral study in order to verify whether some industries outperform others in terms of export elasticities. The sectoral breakdown indicates that manufacturing and machinery, which together account for 75% of Italian export, show the highest REER elasticities, albeit a sizeable impact of non-price factors (particularly for export of manufactured goods towards the Eurozone). According to our findings, we conclude by drawing some implications for current policy debates.

price competitiveness, cointegration, Italy export, REER, trade elasticities, Eurozone imbalances