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Macroeconomic imbalances and structural change in the EMU

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  • Ederer, Stefan
  • Reschenhofer, Peter

Abstract

Macroeconomic imbalances in the EMU are at the heart of the current crisis. One explanation for the high current account deficits in the Southern European countries is that they lack a large, competitive and export-oriented industrial sector. The paper tests the hypothesis that parts of the structural change which happened in the EU before 2008 were supported by the divergent unit labour cost developments in the EMU. We look into patterns of structural change and sectoral competitiveness in all EU member countries and assess their linkages by means of a descriptive analysis as well as through econometric estimations. Our results broadly support the hypothesis. Industrial policy, which aims at fostering new competitive export-oriented industries in Southern Europe in order to reduce macroeconomic imbalances in the EMU, should thus be combined with adjustments in relative labour costs.

Suggested Citation

  • Ederer, Stefan & Reschenhofer, Peter, 2018. "Macroeconomic imbalances and structural change in the EMU," Structural Change and Economic Dynamics, Elsevier, vol. 46(C), pages 59-69.
    • Handle: RePEc:eee:streco:v:46:y:2018:i:c:p:59-69
    DOI: 10.1016/j.strueco.2018.04.002
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    References listed on IDEAS

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    3. Grodzicki, Maciej J. & Skrzypek, Jurand, 2020. "Cost-competitiveness and structural change in value chains – vertically-integrated analysis of the European automotive sector," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 276-287.
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    5. Keil, Sascha, 2024. "Assessing the role of non-price factors: Shedding new light on the European competitiveness puzzle," International Economics, Elsevier, vol. 178(C).
    6. Thanh Dinh Su & Canh Phuc Nguyen, 2021. "Twin balances, public governance and private investment: Quantile estimation for OECD countries," International Economics, CEPII research center, issue 165, pages 85-93.
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    8. Gunther Tichy, 2019. "Die nachhaltigen Folgen der Finanzkrise," WIFO Monatsberichte (monthly reports), WIFO, vol. 92(1), pages 47-60, January.

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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