The Ease of Trade Imbalances Within the Euro Area After the 2008 Recession
AbstractRight from the start of the European currency union, trade imbalances could be observed in the current accounts and trade balances of the euro countries. The business cycle upswing reaching into 2008 and the strong inflow of cheap money led to a strong economic expansion especially in the periphery of the euro area. Traditionally abundant wage increases in these countries persisted. In the more export oriented economies in the core of the euro area, however, hardly any wage increases could be observed due to the lacklustre internal demand. As a consequence, those countries gained further in competitiveness in comparison to the periphery. This led to an increase in foreign trade imbalances. With the sharp drop of economic activity in 2008 and the swift dry-up of cheap financial means this process was interrupted. Since, labour unit costs of Spain, Portugal and Greece evolved much more muted than the average of the euro area. As a result, imports of those countries stagnated while exports increased at the same time which led to a nearly balanced external trade in 2012.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by WIFO in its series WIFO Working Papers with number 453.
Length: 14 pages
Date of creation: 29 Aug 2013
Date of revision:
External imbalances Euro area Current account;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-06 (All new papers)
- NEP-EEC-2013-09-06 (European Economics)
- NEP-INT-2013-09-06 (International Trade)
- NEP-MAC-2013-09-06 (Macroeconomics)
- NEP-OPM-2013-09-06 (Open Economy Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jeffrey A. Frankel & Andrew K. Rose, 1996.
"The Endogeneity of the Optimum Currency Area Criteria,"
NBER Working Papers
5700, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
- Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz).
If references are entirely missing, you can add them using this form.