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Wage dynamics and current account rebalancing in the euro area

Author

Listed:
  • A. Berthou.
  • G. Gaulier.

Abstract

Using the NiGEM model, the authors show that a wage moderation in the “deficit” countries of the euro area –i.e. lowering the annual growth rate of wages by one percentage point over a five year horizon– would improve their current account balances by 0.2 to 0.3 percentage points of GDP. The impact would be greater if the wage moderation in the “deficit” euro area countries were accompanied by a simultaneous and symmetrical wage increase in the area’s surplus countries.

Suggested Citation

  • A. Berthou. & G. Gaulier., 2013. "Wage dynamics and current account rebalancing in the euro area," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 30, pages 71-91, Summer.
  • Handle: RePEc:bfr:quarte:2013:30:05
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Y. Kalantzis. & P. Towbin. & S. Zignago., 2014. "International adjustment and rebalancing of global demand:where do we stand?," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, pages 5-23.
    2. Céline Antonin & Christophe Blot & Sabine Le Bayon & Catherine Mathieu, 2013. "La quête de la competitivité ouvre la voie de la déflation," Sciences Po publications info:hdl:2441/7o52iohb7k6, Sciences Po.
    3. repec:bfr:bullbf:2013:195:03 is not listed on IDEAS

    More about this item

    Keywords

    current account balance; symmetrical adjustment; price adjustment; wages; domestic demand; capital flows; euro area; rebalancing.;

    JEL classification:

    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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