Rules, Imbalances, and Growth in the Eurozone

Schilirò, Daniele

doi:10.1108/s1569-376720170000018005

Cited by 4 publications

(2 citation statements)

References 13 publications

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“…Consider that having free trade of goods and services, the prices of the former will be cheaper than those of the latter and this will not depend on the individual efficiency of the companies. Therefore, the current account imbalances (Schilirò, 2017) have become increasingly important.…”

Section: Inflation Convergence or Divergence?mentioning

confidence: 99%

Overvaluation in a non-optimal currency area

Ferrer

2020

IJCEE

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The devaluation tool in an optimal currency area allows economic policies to adjust relative costs in front of economic shocks. Devaluation risk is due to the relationship of domestic inflation with that of a nation's trading partners. If the gap between them is not adjusted by depreciation, it will start a process of overvaluation of national currency which ends in a trade deficit, reduced gross domestic product (GDP) and rising unemployment. Devaluation or depreciation would restore the competitiveness of the productive apparatus. However, in a non-optimal currency area -as a country unilaterally dollarised -this adjustment may be made by abandoning the anchor coin and adopting a new national currency, what it has been called 'demonetisation' (Encinas-Ferrer, 2003a, 2003b. The Eurozone experience from 2011 shows us that abandoning a non-optimal currency area and establishing a new national currency is a decision that no one has dared to take.

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Section: Inflation Convergence or Divergence?mentioning

confidence: 99%

Overvaluation in a non-optimal currency area

Ferrer

2020

IJCEE

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“…Discipline of economic policy is of crucial importance in rigid exchange rate arrangements, such as monetary union, in order to avoid real exchange rate appreciation, competitiveness deterioration and, consequent growing and chronic current account deficit. Since the monetary policy is not under control of national economic authorities, too excessive fiscal loosening is seen as the main problem within the monetary union (Alessandrini et al, 2014;Schiliro, 2017). Figure 2 shows macroeconomic fiscal imbalance within the EZ.…”

Section: Macroeconomic Internal and External Imbalances In The Eurozonementioning

confidence: 99%

Macroeconomic Еxternal (Im)Balances within the Eurozone: Core Vs Periphery

Pucar

Glavaški

2019

Economic Themes

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Since the foundation of the eurozone (EZ) until the crisis outbreak, the macroeconomic imbalances between EZ core and EZ periphery have been identified at the internal and external plan. Growing external divergence was evident in the precrisis period reflected in the chronic current account deficit of the periphery, and vice versa for the core EZ members. However, external imbalance within the EZ has been substantially narrowed in the postcrisis period. Based on the panel data framework, crucial factors of current account improvement/worsening are identified in the precrisis 1999-2007 period, as well as the postcrisis 2008-2017 period. Random effect model with standard errors robust to autocorrelation and heteroskedasticity is estimated, in which current account is analysed in dependence from economic growth, fiscal balance, EZ interest rate, real effective exchange rate, openness and dummy variable for the EZ core/periphery. Empirical findings for the precrisis period confirm macroeconomic overheating of the periphery as the main cause of current account worsening, while the postcrisis improvement has been achieved mainly through fiscal contraction and European Central Bank (ECB) loosened monetary stance.

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The impact of the exchange rate on the foreign trade imbalance during the economic crisis in the new EU member states and the Western Balkan countries

Rajković

Bjelić

Jaćimović

et al. 2020

Economic Research-Ekonomska Istraživanja

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This paper examines the relationship between the real exchange rate and the foreign trade imbalance in both the Western Balkan (WB) and Central and Eastern European (CEE) countries. During the most recent global economic crisis, examining the impact of the exchange rate on the balance of trade took on a particular importance. Countries used a variety of monetary policy regimes and, depending on their choice, they had different economic instruments available to deal with the crisis. The aim of the research was whether exchange rate devaluation and/or depreciation are capable of effectively and fully eliminating the negative effects of the global economic crisis, as well as the consequent poor export performance and contracted economic activity. Our findings show that during an economic crisis those countries that use their own currency cannot substantially adjust their trade deficit by depreciating their currency. Moreover, it is suggested that during the global economic crisis, the balance of payments deficit is not impacted significantly by the exchange rate, any more. In such cases, other factors play a more significant role, like as government spending, followed by foreign demand and direct investments.

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Rules, Imbalances, and Growth in the Eurozone

Cited by 4 publications

References 13 publications

Overvaluation in a non-optimal currency area

Overvaluation in a non-optimal currency area

Macroeconomic Еxternal (Im)Balances within the Eurozone: Core Vs Periphery

The impact of the exchange rate on the foreign trade imbalance during the economic crisis in the new EU member states and the Western Balkan countries

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