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The global downturn and its impact on euro area exports and competitiveness

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  • di Mauro, Filippo
  • Forster, Katrin
  • Lima, Ana

Abstract

World trade contracted sharply in late 2008 and early 2009 following the deepening of the financial crisis in September 2008. This paper discusses the main mechanisms behind the global downturn in trade and its impact on euro area exports and competitiveness. It finds that the euro area was hit particularly hard by the contraction in global demand. Moreover, the collapse in the demand for euro area products during the downturn was exacerbated to some degree by unfavourable developments in price competitiveness, resulting in further losses in competitiveness compared to our main trading partners, in line with pre-crisis trends. This view is also confirmed by evidence from broad-based competitiveness measures, which show that euro area countries recorded losses in productivity during this period. Going forward, the recovery in world trade will depend mainly on a resurgence in global demand and its expenditure composition. With regard to the euro area, as the global economy recovers at varying speeds and given the current growth momentum in emerging economies, the performance of the external sector may be hindered by the geographical orientation of its export markets, which are mainly focused on advanced economies and other EU member states. Furthermore, the strength and sustainability of the recovery in exports will also depend on the structuring process undertaken by European firms in response to globalisation-related challenges. Governments within the European Union should therefore focus on policies to strengthen competition and increase market integration, in order to benefit fully from the globalisation process going forward. In contrast, a resurgence in global protectionist policies could dampen the prospects for world and euro area trade and should be strongly resisted. JEL Classification: C32, O11

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  • di Mauro, Filippo & Forster, Katrin & Lima, Ana, 2010. "The global downturn and its impact on euro area exports and competitiveness," Occasional Paper Series 119, European Central Bank.
    • Handle: RePEc:ecb:ecbops:2010119
    Note: 437559
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Wagner, Joachim, 2012. "The Microstructure of the Great Export Collapse in German Manufacturing Industries, 2008/2009," IZA Discussion Papers 6393, Institute of Labor Economics (IZA).
    2. Ms. Ruo Chen & Mr. Gian M Milesi-Ferretti & Mr. Thierry Tressel, 2012. "External Imbalances in the Euro Area," IMF Working Papers 2012/236, International Monetary Fund.
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    4. Silvia Fabiani & Alberto Felettigh & Claire Giordano & Roberto Torrini, 2019. "Making room for new competitors. A comparative perspective on Italy’s exports in the euro-area market," Questioni di Economia e Finanza (Occasional Papers) 530, Bank of Italy, Economic Research and International Relations Area.
    5. Orszaghova, Lucia & Savelin, Li & Schudel, Willem, 2013. "External competitiveness of EU candidate countries," Occasional Paper Series 141, European Central Bank.
    6. Bodea, Cristina & Huemer, Stefan, 2010. "Dancing together at arm's length? - the interaction of central banks with governments in the G7," Occasional Paper Series 120, European Central Bank.
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    8. Wagner, Joachim, 2013. "The granular nature of the great export collapse in German manufacturing industries, 2008/2009," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 7, pages 1-21.
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    11. Orszaghova, Lucia & Savelin, Li & Schudel, Willem, 2013. "External competitiveness of EU candidate countries," Occasional Paper Series 141, European Central Bank.
    12. George Economakis & Maria Markaki & Alexios Anastasiadis, 2015. "Structural Analysis of the Greek Economy," Review of Radical Political Economics, Union for Radical Political Economics, vol. 47(3), pages 424-445, September.
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    14. Bernardina Algieri, 2015. "Price and non-price competitiveness in export demand: empirical evidence from Italy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(1), pages 157-183, February.
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    19. Beirne, John & Dalitz, Lars & Ejsing, Jacob & Grothe, Magdalena & Manganelli, Simone & Monar, Fernando & Sahel, Benjamin & Sušec, Matjaž & Tapking, Jens & Vong, Tana, 2011. "The impact of the Eurosystem's covered bond purchase programme on the primary and secondary markets," Occasional Paper Series 122, European Central Bank.
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    23. di Mauro, Filippo & Forster, Katrin & Lima, Ana, 2010. "The global downturn and its impact on euro area exports and competitiveness," Occasional Paper Series 119, European Central Bank.
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    More about this item

    Keywords

    competitiveness; euro area; trade;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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