IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/20161940.html
   My bibliography  Save this paper

How competitiveness shocks affect macroeconomic performance across euro area countries

Author

Listed:
  • Staehr, Karsten
  • Vermeulen, Robert

Abstract

This paper considers the short-term effects of competitiveness shocks on macroeconomic performance in the euro area. Vector autoregressive models are estimated on quarterly data from 1995 to 2013 for individual countries and the whole euro area. The results show that competitiveness shocks help to explain subsequent GDP developments in most countries but have little explanatory power for the current account balance and domestic credit. These results apply for all of the competitiveness measures considered, but a non-traditional competitiveness measure accounting for quality differences fares better in some cases. The effects of the competitiveness measures vary substantially across the countries in the euro area, which likely reflects their different economic structures and institutions. This heterogeneity suggests that policy measures seeking to improve competitiveness may have very different effects on economic performance and financial stability in different countries. JEL Classification: E32, E61, F32

Suggested Citation

  • Staehr, Karsten & Vermeulen, Robert, 2016. "How competitiveness shocks affect macroeconomic performance across euro area countries," Working Paper Series 1940, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20161940
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1940.en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Claudia Foroni & Massimiliano Marcellino, 2013. "A survey of econometric methods for mixed-frequency data," Working Paper 2013/06, Norges Bank.
    2. Nils Holinski & Robert Vermeulen, 2012. "The international wealth channel: a global error-correcting analysis," Empirical Economics, Springer, vol. 43(3), pages 985-1010, December.
    3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    4. Jesus Felipe & Utsav Kumar, 2014. "Unit labor costs in the eurozone: the competitiveness debate again," Review of Keynesian Economics, Edward Elgar Publishing, vol. 2(4), pages 490-507, October.
    5. √Íscar Jord√Ä & Moritz Schularick & Alan M. Taylor, 2013. "When Credit Bites Back," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s2), pages 3-28, December.
    6. Mariarosaria Comunale & Jeroen Hessel, 2014. "Current account imbalances in the Euro area: Competitiveness or financial cycle?," DNB Working Papers 443, Netherlands Central Bank, Research Department.
    7. Hubert Gabrisch & Karsten Staehr, 2015. "The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 53(3), pages 558-576, May.
    8. Eickmeier, Sandra & Ng, Tim, 2015. "How do US credit supply shocks propagate internationally? A GVAR approach," European Economic Review, Elsevier, vol. 74(C), pages 128-145.
    9. Boyd, Derick & Caporale, Gugielmo Maria & Smith, Ron, 2001. "Real Exchange Rate Effects on the Balance of Trade: Cointegration and the Marshall-Lerner Condition," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 187-200, July.
    10. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    11. De Grauwe, Paul, 2016. "Economics of Monetary Union," OUP Catalogue, Oxford University Press, edition 11, number 9780198739876.
    12. Peter Hoeller & Claude Giorno & Christine de la Maisonneuve, 2004. "One Money, One Cycle?: Making Monetary Union a Smoother Ride," OECD Economics Department Working Papers 401, OECD Publishing.
    13. Taylor, Alan M., 2012. "External Imbalances and Financial Crises," CEPR Discussion Papers 9255, C.E.P.R. Discussion Papers.
    14. repec:ecb:ecbops:2012163 is not listed on IDEAS
    15. Mr. Thierry Tressel & Mr. Shengzu Wang, 2014. "Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments," IMF Working Papers 2014/130, International Monetary Fund.
    16. Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers 2008 - 2015 198, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    17. Osbat, Chiara & Jochem, Alex & Özyurt, Selin & Tello, Patry & Bragoudakis, Zacharias & Micallef, Brian & Sideris, Dimitris & Papadopoulou, Niki & Ajevskis, Viktors & Krekó, Judit & Gaulier, Guillaume , 2012. "Competitiveness and external imbalances within the euro area," Occasional Paper Series 139, European Central Bank.
    18. Sanchez , Jose Luis Diaz & Varoudakis, Aristomene, 2013. "Growth and competitiveness as factors of Eurozone external imbalances : evidence and policy implications," Policy Research Working Paper Series 6732, The World Bank.
    19. Holger Zemanek & Ansgar Belke & Gunther Schnabl, 2009. "Current Account Imbalances and Structural Adjustment in the Euro Area: How to Rebalance Competitiveness," Discussion Papers of DIW Berlin 895, DIW Berlin, German Institute for Economic Research.
    20. Mohsen Bahmani-Oskooee & Artatrana Ratha, 2004. "The J-Curve: a literature review," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1377-1398.
    21. Ansgar Belke & Christian Dreger, 2013. "Current Account Imbalances in the Euro Area: Does Catching up Explain the Development?," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 6-17, February.
    22. A team of the Working Group on Econometric Modelling of the European System of Central Banks, 2012. "Competitiveness and external imbalances within the euro area," Occasional Paper Series 139, European Central Bank.
    23. A. Berthou & E. Dhyne, 2018. "Exchange Rate Movements, Firm-Level Exports and Heterogeneity," Working papers 660, Banque de France.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Comunale, Mariarosaria, 2022. "A panel VAR analysis of macro-financial imbalances in the EU," Journal of International Money and Finance, Elsevier, vol. 121(C).
    2. Ambaw, Dessie & Pundit, Madhavi & Ramayandi, Arief & Sim, Nicholas, 2022. "Real Exchange Rate Misalignment and Business Cycle Fluctuations in Asia and the Pacific," ADB Economics Working Paper Series 651, Asian Development Bank.
    3. Dessie Ambaw & Madhavi Pundit & Arief Ramayandi & Nicholas Sim, 2023. "Real exchange rate misalignment and business cycle fluctuations in the Asia‐Pacific," Asian Economic Journal, East Asian Economic Association, vol. 37(2), pages 164-189, June.
    4. repec:zbw:bofitp:2021_011 is not listed on IDEAS
    5. Juan Carlos Cuestas & Javier Ordóñez & Karsten Staehr, 2019. "Unit labour costs and the dynamics of output and unemployment in the southern European crisis countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(3), pages 597-616, August.
    6. Joscha Beckmann & Mariarosaria Comunale, 2020. "Exchange rate fluctuations and the financial channel in emerging economies," Bank of Lithuania Working Paper Series 83, Bank of Lithuania.
    7. OSUJI Emeka, 2020. "Intra-African Trade, Macroeconomic Conditions And Competitiveness In Africa," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 15(1), pages 171-193, April.
    8. Joscha Beckmann & Mariarosaria Comunale, 2020. "Exchange rate fluctuations and the financial channel in emerging economies," Bank of Lithuania Working Paper Series 83, Bank of Lithuania.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Staehr, Karsten & Vermeulen, Robert, 2016. "How competitiveness shocks affect macroeconomic performance across euro area countries," Working Paper Series 1940, European Central Bank.
    2. Hubert Gabrisch & Karsten Staehr, 2015. "The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 53(3), pages 558-576, May.
    3. Pierluigi, Beatrice & Sondermann, David, 2018. "Macroeconomic imbalances in the euro area: where do we stand?," Occasional Paper Series 211, European Central Bank.
    4. Pilar Beneito & Carlos Chafer, 2017. "Current Account Imbalances and Cost Competitiveness: The Role of the Euro," Working Papers 1703, Department of Applied Economics II, Universidad de Valencia.
    5. Angelini, E. & Dieppe, A. & Pierluigi, B., 2015. "Modelling internal devaluation experiences in Europe: Rational or learning agents?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 81-92.
    6. Walter Paternesi Meloni, 2017. "Austerity & Competitiveness in the Eurozone: a misleading linkage," Departmental Working Papers of Economics - University 'Roma Tre' 0223, Department of Economics - University Roma Tre.
    7. 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.
    8. Chisiridis, Konstantinos & Mouratidis, Kostas & Panagiotidis, Theodore, 2022. "The north-south divide, the euro and the world," Journal of International Money and Finance, Elsevier, vol. 121(C).
    9. Hubert Gabrisch, 2015. "Net Capital Flows To And The Real Exchange Rate Of Western Balkan Countries," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 60(205), pages 31-52, April – J.
    10. Florian Morvillier, 2018. "On the impact of the launch of the euro on EMU macroeconomic vulnerability," Working Papers hal-04141675, HAL.
    11. 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.
    12. Borsi, Mihály Tamás, 2018. "Credit contractions and unemployment," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 573-593.
    13. Stockhammer, Engelbert & Constantine, Collin & Reissl, Severin, 2016. "Neoliberalism, trade imbalances and economic policy in the Eurozone crisis," Economics Discussion Papers 2016-3, School of Economics, Kingston University London.
    14. Hubert Gabrisch, 2017. "Explaining trade imbalances in the euro area: Liquidity preference and the role of finance," PSL Quarterly Review, Economia civile, vol. 70(281), pages 155-184.
    15. Mariarosaria Comunale & Jeroen Hessel, 2014. "Current account imbalances in the Euro area: Competitiveness or financial cycle?," DNB Working Papers 443, Netherlands Central Bank, Research Department.
    16. Radovan Kovačević, 2019. "The Export Performance Of The Euro Area: A Panel Quantile Regression Approach," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 64(222), pages 7-62, July – Se.
    17. Hubert Gabrisch & Karsten Staehr, 2014. "The Euro Plus Pact: Cost Competitiveness and External Capital Flows in the EU Countries. WWWforEurope Policy Paper No. 15," WIFO Studies, WIFO, number 47496.
    18. Enno Schröder, 2015. "Eurozone Imbalances: Measuring the Contribution of Expenditure Switching and Expenditure Volumes 1990-2013," Working Papers 1508, New School for Social Research, Department of Economics, revised Sep 2015.
    19. Hsing, Yu, 2009. "Test of the J-curve for the DR-CAFTA countries and policy implications," Research in International Business and Finance, Elsevier, vol. 23(3), pages 293-301, September.
    20. Gabrisch, Hubert & Staehr, Karsten, 2014. "The euro plus pact: cost competitiveness and external capital flows in the EU countries," Working Paper Series 1650, European Central Bank.

    More about this item

    Keywords

    competitiveness; euro area; macroeconomic variables; transmission;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20161940. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.