Abstract
The purpose of this paper is to investigate the (relative) roles of two sources of reduced international competitiveness in New Zealand during the last few years: the appreciation of the trade-weighted real exchange rate, and the (relative) inefficiency of the local service sector. According to the exercises reported in this paper, reducing services' inefficiencies is a more effective way of improving competitiveness, broadly defined, than engineering (or hoping for) a real exchange rate depreciation.
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