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Who benefits from euro depreciation in the euro zone?

Author

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  • Mohsen Bahmani-Oskooee

    (The University of Wisconsin-Milwaukee)

  • Amirhossein Mohammadian

    (The University of Wisconsin-Milwaukee)

Abstract

In this paper, we try to assess the short-run and long-run effects of changes in the value of the euro on the trade balance of 12 original members of the euro zone to identify those who benefit from euro depreciation. After estimating a linear and a nonlinear trade balance model for each country, the results favor the nonlinear adjustment of the real euro and nonlinear models. We find that while seven members will benefit from a euro depreciation, Germany is the only country that will also benefit from a euro appreciation, perhaps due to an inelastic world demand for German goods. The results also support asymmetric effects of euro appreciation and euro depreciation in most countries in the zone, in the short run as well as in the long run.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Amirhossein Mohammadian, 2019. "Who benefits from euro depreciation in the euro zone?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(3), pages 577-595, August.
    • Handle: RePEc:kap:empiri:v:46:y:2019:i:3:d:10.1007_s10663-018-9408-8
    DOI: 10.1007/s10663-018-9408-8
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    Cited by:

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    2. Lucio Gobbi & Stefano Lucarelli, 2021. "ECB quantitative easing, euro depreciation and supply chains: Industry-level estimates for Germany, Italy and Greece. New prospects for a Minskyan big bank?," PSL Quarterly Review, Economia civile, vol. 74(296), pages 25-50.
    3. Mohsen Bahmani-Oskooee & Jungho Baek, 2021. "Exchange rate volatility and domestic investment in G7: are the effects asymmetric?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(3), pages 775-799, August.
    4. Faheem Ur Rehman & József Popp & Ejaz Ahmad & Muhammad Asif Khan & Zoltán Lakner, 2021. "Asymmetric and Symmetric Link between Quality of Institutions and Sectorial Foreign Direct Investment Inflow in India: A Fresh Insight Using Simulated Dynamic ARDL Approach," Sustainability, MDPI, vol. 13(24), pages 1-18, December.

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    More about this item

    Keywords

    Euro zone; Euro; Trade balance; Asymmetry;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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