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Who Gains From Nominal Devaluation? An Empirical Assessment of Euro-area Exports and Imports

Author

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  • Sebastian Breuer
  • Jens Klose

Abstract

type="main" xml:id="twec12241-abs-0001"> In early 2013, rumours about the euro-appreciation gained momentum, which may lead to decreases in exports and increases in imports of the member states. Therefore, we investigate the impact of changes in the nominal euro exchange rate vis-à-vis major currencies on export and import performance of nine different euro-area countries. To disentangle the ‘true’ equilibrium elasticities Stein's unbiased risk estimate (SURE) system error correction models (SSECM) are estimated for nominal exchange rate changes versus the rest of the world or other major currencies. To differentiate between price level changes and changes of the nominal exchange rate, a country's export and import equation is estimated using separately the nominal rate and the relative price/unit labour cost as regressors. Results of Wald tests indicate that assuming both variables to have the same influence on exports and imports is misleading. Whether the relative price/unit labour costs elasticities are high or low depends crucially on which indicator is chosen, while the effect of nominal exchange rate changes can be estimated robustly for all countries in the sample. In particular, France and Spain are hit by a euro-appreciation since their exports are highly exchange rate elastic. However, for France, this effect is at least partly offset by an also negative exchange rate elasticity of imports.

Suggested Citation

  • Sebastian Breuer & Jens Klose, 2015. "Who Gains From Nominal Devaluation? An Empirical Assessment of Euro-area Exports and Imports," The World Economy, Wiley Blackwell, vol. 38(12), pages 1966-1989, December.
    • Handle: RePEc:bla:worlde:v:38:y:2015:i:12:p:1966-1989
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    File URL: http://hdl.handle.net/10.1111/twec.2015.38.issue-12
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    Cited by:

    1. Yu Hsing, 2017. "Is Real Depreciation And More Government Spending Expansionary? The Case Of Montenegro," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 20, pages 103-113, December.
    2. Sascha Keil, 2023. "The challenging estimation of trade elasticities: Tackling the inconclusive Eurozone evidence," The World Economy, Wiley Blackwell, vol. 46(5), pages 1235-1263, May.
    3. Walter Paternesi Meloni, 2021. "The price vs. non-price competitiveness conundrum: a post-Keynesian comparative political economy analysis," Working Papers PKWP2109, Post Keynesian Economics Society (PKES).
    4. Álvarez López, M.ª Elisa & Vega Crespo, Josefa, 2017. "La fortaleza competitiva de la economía española/The Competitive Strength of the Spanish Economy," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 35, pages 7-34, Enero.
    5. Servaas Storm & C.W.M. Naastepad, 2015. "Crisis and Recovery in the German Economy: The Real Lessons," Working Papers Series 10, Institute for New Economic Thinking.
    6. John Lewis & Selien De Schryder, 2015. "Export dynamics since the Great Trade Collapse: a cross-country analysis," Bank of England working papers 535, Bank of England.
    7. Stefano Lucarelli & Filippo Umberto Andrini & Annamaria Bianchi, 2018. "Euro depreciation and trade asymmetries between Germany and Italy versus the US: industry-level estimates," Applied Economics, Taylor & Francis Journals, vol. 50(1), pages 15-34, January.
    8. Wagener, Hans-Jürgen & Eger, Thomas, 2014. "Interne vs. externe Abwertung: Außenwirtschaftliches Ungleichgewicht im Eurosystem," Beiträge zur Jahrestagung 2014 (Goettingen) 107398, Verein für Socialpolitik, Ausschuss für Wirtschaftssysteme und Institutionenökonomik.
    9. Storm, Servaas & Naastepad, C.W.M., 2015. "Crisis and recovery in the German economy: The real lessons," Structural Change and Economic Dynamics, Elsevier, vol. 32(C), pages 11-24.
    10. Sascha Keil, 2021. "The Challenging Estimation Of Trade Elasticities:Tackling The Inconclusive Eurozone Evidence," Chemnitz Economic Papers 042, Department of Economics, Chemnitz University of Technology, revised May 2021.
    11. Bofinger, Peter & Buch, Claudia M. & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2013. "Gegen eine rückwärtsgewandte Wirtschaftspolitik. Jahresgutachten 2013/14 [Against a backward-looking economic policy. Annual Report 2013/14]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201314.
    12. Heinze, Henriette, 2018. "The determinants of German exports: An analysis of intra- and extra-EMU trade," IPE Working Papers 95/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    13. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2017. "Für eine zukunftsorientierte Wirtschaftspolitik. Jahresgutachten 2017/18 [Towards a Forward-Looking Economic Policy. Annual Report 2017/18]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201718.
    14. ALIN MARIUS ANDRIES & Simona MUTU, 2017. "Bank Business Models And Performance During Crisis In Central And Eastern Europe," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 20, pages 79-113, December.
    15. Sascha Keil & Walter Paternesi Meloni, 2024. "Kaldorian cumulative causation in the Euro area: an empirical assessment of divergent export competitiveness," Chemnitz Economic Papers 063, Department of Economics, Chemnitz University of Technology.
    16. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2014. "Mehr Vertrauen in Marktprozesse. Jahresgutachten 2014/15 [More confidence in market processes. Annual Report 2014/15]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201415.

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