Assessing a country's competitiveness routinely starts with an analysis of the real
exchange rate. However, in low-income countries, empirical analysis of the real exchange
rate is often subject to important limitations that seriously weaken the results.
This paper summarizes the methodologies used to assess real exchange rate misalignments
and discusses the range of obstacles common to low-income countries. Recognizing
the importance of using a wide range of indicators for assessing competitiveness
in low-income countries, the paper discusses alternative competitive measures and
then proposes a template of indicators to allow for a systematic assessment of competitiveness
in low-income countries. The template is then used to rank countries according to
their competitiveness performance in 2006.