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On the Persistence of Trade Imbalances: Evidence from Europe

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  • Nitsch, Volker
  • Berger, Helge

Abstract

Does exchange rate variability affect the speed of external adjustment? We study bilateral trade balances for a sample of 18 European countries over the period from 1948 through 2008. We find that, with the introduction of the euro, trade imbalances among euro area members widened considerably, even after allowing for permanent asymmetries in trade competitiveness within pairs of countries or in the overall trade competitiveness of individual countries. Intra-euro area imbalances also seem to have become more persistent with the introduction of the euro. Greater persistence is partially linked to economic and regulatory inflexibilities, such as fiscal restrictions and labor market rigidities.

Suggested Citation

  • Nitsch, Volker & Berger, Helge, 2013. "On the Persistence of Trade Imbalances: Evidence from Europe," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 77398, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
  • Handle: RePEc:dar:wpaper:77398
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/77398/
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    JEL classification:

    • 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
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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