IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Interest rates, Eurobonds and intra-European exchange rate misalignments

Listed author(s):
  • Vincent Duwicquet

    ()

    (CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • Jacques Mazier

    (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

  • Jamel Saadaoui

    ()

    (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique, BETA - Bureau d'Economie Théorique et Appliquée - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

The euro crisis sheds light on the nature of alternative adjustment mechanisms in a heterogeneous monetary union. Exchange rate adjustments being impossible, it remains very few efficient alternative mechanisms. At the level of the whole eurozone the euro is close to its equilibrium parity. But the euro remains overvalued for Southern European countries, France included, and largely undervalued for Northern European countries, especially for Germany. This paper gives a new evaluation of these exchange rate misalignments inside the eurozone thanks to a FEER approach. In a second step, we use a two-country SFC model of a monetary union with endogenous interest rates and Eurobonds. Overvaluations amount to negative competitiveness shocks in Southern countries. In this respect, three main results are found. Firstly, an increase of intra-European financing by banks of northern countries or other institutions could contribute to reduce the debt burden and induce a partial recovery but public debt would increase. Secondly, the implementation of Eurobonds as a tool to partially mutualize European sovereign debt would have a rather similar positive impact with a public debt limited to 70 percent of GDP. Thirdly, Eurobonds could also be used to finance large European projects which could impulse a stronger recovery in the entire zone with stabilized current account balances.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://hal.archives-ouvertes.fr/hal-01359820/document
Download Restriction: no

Paper provided by HAL in its series Post-Print with number hal-01359820.

as
in new window

Length:
Date of creation: 08 Sep 2016
Publication status: Published in Economics, Economic Policies and Sustainable Growth in the Wake of the Crisis, 8-10 September, 2016, Ancona, Italy, Sep 2016, Ancône, Italy.
Handle: RePEc:hal:journl:hal-01359820
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01359820
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Vincent Duwicquet & Jacques Mazier & Jamel Saadaoui, 2013. "Désajustements de change, fédéralisme budgétaire et redistribution. Comment s'ajuster en union monétaire," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 57-96.
  2. Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010. "Exchange Rate Misalignments at World and European Levels: a FEER Approach," International Economics, CEPII research center, issue 121, pages 25-58.
  3. Jacques Mazier & Sophie Saglio, 2008. "Interdependency and adjustments in the European Union," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(1), pages 17-44.
  4. Vincent Duwicquet & Jacques Mazier, 2010. "Financial integration and macroeconomic adjustments in a monetary union," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 33(2), pages 333-370, January.
  5. Jacques Mazier & Sebastian Valdecantos, 2015. "A multi-speed Europe: is it viable? A stock-flow consistent approach," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 12(1), pages 93-112, April.
  6. Asdrubali, Pierfederico & Kim, Soyoung, 2004. "Dynamic risksharing in the United States and Europe," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 809-836, May.
  7. Olivier Blanchard & Gian Maria Milesi-Ferretti, 2012. "(Why) Should Current Account Balances Be Reduced?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(1), pages 139-150, April.
  8. Wynne Godley & Marc Lavoie, 2006. "Comprehensive accounting in simple open economy macroeconomics with endogenous sterilization or flexible exchange rates," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(2), pages 241-276, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01359820. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.