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On the impact of the launch of the euro on EMU macroeconomic vulnerability

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  • Florian Morvillier

Abstract

This paper aims at investigating the role played by the euro’s inception on external imbalances and macroeconomic vulnerability of the eurozone. To this end, we estimate a panel VAR model over the pre-euro (1980-1998) and EMU (1999-2016) periods for eleven eurozone members. Our findings show that with the adoption of the single currency, current account vulnerability to demand and currency misalignments shocks increases significantly. The correction of external imbalances within the euro area also becomes more difficult because of the disparition of a slow-growth process and devaluations as adjustment tools.

Suggested Citation

  • Florian Morvillier, 2018. "On the impact of the launch of the euro on EMU macroeconomic vulnerability," EconomiX Working Papers 2018-51, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2018-51
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    Keywords

    Global imbalances; current account; output gap; exchange-rate misalignments; panel VAR.;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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