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Current Account Imbalances and Structural Adjustment in the Euro Area: How to Rebalance Competitiveness

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Author Info
Holger Zemanek
Ansgar Belke
Gunther Schnabl

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Abstract

Low international competitiveness of a set of euro area countries, which have become evident by large current account deficits and rising risk premiums on government bonds, is one of the most challenging economic policy issues for Europe. We analyse the role of private restructuring and public structural reforms for the urgently needed readjustment of intra-euro area imbalances. A panel regression reveals a significant impact of private restructuring and public structural reforms on intra-euro area competitiveness. This implies that private restructuring and public reforms are rather than public transfers the best way to preserve long-term economic stability in Europe.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 895.

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Length: 39 p.
Date of creation: 2009
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Handle: RePEc:diw:diwwpp:dp895

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Related research
Keywords: Structural reforms; competitiveness; current account imbalances; euro area; European Monetary Union; dynamic panel estimation; interaction term;

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
F15 - International Economics - - Trade - - - Economic Integration
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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