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Macroeconomic Imbalances and Structural Change in the EMU

Author

Listed:
  • Stefan Ederer
  • Peter Reschenhofer

Abstract

Macroeconomic imbalances in the EMU are at the heart of the current crisis. A widely popular 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 descripitve analysis as well as through econometric estimations. Our results broadly support the hypothesis. Structural policies alone to foster new competitive export-oriented industries in Southern Europe in order to reduce macroeconomic imbalances in the EMU would not be efficient without accompanying adjustments in relative labour costs.

Suggested Citation

  • Stefan Ederer & Peter Reschenhofer, 2014. "Macroeconomic Imbalances and Structural Change in the EMU," WWWforEurope Working Papers series 69, WWWforEurope.
  • Handle: RePEc:feu:wfewop:y:2014:m:10:d:0:i:69
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    File URL: http://www.foreurope.eu/fileadmin/documents/pdf/Workingpapers/WWWforEurope_WPS_no069_MS222.pdf
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    References listed on IDEAS

    as
    1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    2. Stefan Ederer & Peter Reschenhofer, 2013. "Macroeconomic Imbalances in the EU," WWWforEurope Working Papers series 42, WWWforEurope.
    3. Marcel Timmer & Abdul A. Erumban & Reitze Gouma & Bart Los & Umed Temurshoev & Gaaitzen J. de Vries & I–aki Arto & Valeria Andreoni AurŽlien Genty & Frederik Neuwahl & JosŽ M. Rueda?Cantuche & Joseph , 2012. "The World Input-Output Database (WIOD): Contents, Sources and Methods," IIDE Discussion Papers 20120401, Institue for International and Development Economics.
    4. Karl Aiginger, 2014. "Industrial Policy for a Sustainable Growth Path," WIFO Working Papers 469, WIFO.
    5. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    6. Karl Aiginger & Susanne Bärenthaler-Sieber & Johanna Vogel, 2013. "Competitiveness under New Perspectives," WWWforEurope Working Papers series 44, WWWforEurope.
    7. Stefan Ederer & Peter Reschenhofer, 2014. "A global value chain analysis of macroeconomic imbalances in Europe," WWWforEurope Working Papers series 67, WWWforEurope.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. repec:wfo:wstudy:58791 is not listed on IDEAS
    2. Karl Aiginger, 2016. "New Dynamics for Europe: Reaping the Benefits of Socio-ecological Transition. Synthesis Report Part I," WWWforEurope Deliverables series 11, WWWforEurope.
    3. Stefan Ederer, 2015. "Macroeconomic imbalances and institutional reforms in the EMU," WWWforEurope Working Papers series 87, WWWforEurope.
    4. repec:wfo:wstudy:57896 is not listed on IDEAS
    5. repec:wfo:wstudy:59037 is not listed on IDEAS

    More about this item

    Keywords

    Macroeconomic imbalances; structural change; labour costs; dynamic panel regression;

    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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