The equilibrium real exchange rate is the one of the key concepts in the macroeconomic and policy analysis. The importance of this concept yet increases in a currency union. In general, the real exchange rate misalignments are perceived to be the causes of the loss of a competitiveness, growth slowdowns and currency crises in cases of overvaluation, overheating and inflation in cases of undervaluation, sectoral misallocations of resources and global economic imbalances. In a case of a currency union the divergent dynamics of real effective exchange rates in the individual countries-both the actual and an equilibrium-will exacerbate both economic and political tensions (in addition to above mentioned problems) and may lead to the collapse of not only the monetary union per se but the underlying integration processes as well. This paper employs the estimation of the BEER (behavioral equilibrium exchange rate) for the seven Eurozone countries: Germany, France, Italy, Spain, Greece, Portugal and Ireland for the 1999:1-2011:3 period. The purpose is to compare the performance of the Eurozone "powerhouses" (Germany and France) with the countries on the Mediterranean littoral plus Ireland (so called "troubled periphery"). Those estimates are then used to calculate the degree of Euro's misalignment and the magnitude, persistence and the direction of dynamic tendencies within the Eurozone itself.
The paper analyzes the long term dynamics of the relationship between the competitiveness and the unemployment in the Eurozone, with the emphasis on the "North" and "South" differences. Using the productivity per person as a proxy for competitiveness, it shows both the differences between the North and South of the Eurozone and the differences between the pre-crisis and crisis periods in both areas. Moreover, it demonstrates that the relationship between the competitiveness and unemployment is negative in the North and undetectable in the most of the South. These results indicate that the recent gains in competitiveness can be preserved-and even perhaps extended-without the negative impact on employment. Indeed, in this context the structural reforms are the key.
Abstract:Real convergence is the key economic challenge for the new EU Member Countries. The main growth area today is the "new" entrepreneurial economy of creativity and innovation. But such an economy needs a financial structure capable of coping with the higher risk inherent in the "new" economy. To provide such a financial structure, the financial markets must be broad, deep and liquid, i.e. financial markets must be large enough to provide this financial structure. Hence, the financial integration became an imperative for the new Member Countries. But this integration process possesses both economic and political challenges and dilemmas. Answers to those challenges and dilemmas will then determine the degree of real convergence -and hence the degree of economic success -for each new Member State.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.