Interest rates, Eurobonds and intra-European exchange rate misalignments
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.
|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. |
|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.:
- 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.
- Duwicquet, Vincent & Mazier, Jacques & Saadaoui, Jamel, 2012.
"Désajustements de change, fédéralisme budgétaire et redistribution : comment s’ajuster en union monétaire
[Exchange Rate Misalignments, Fiscal Federalism and Redistribution: How to Adjust in a Mone," MPRA Paper 42858, University Library of Munich, Germany.
- Vincent Duwicquet & Jacques Mazier & Jamel Saadaoui, 2013. "Désajustements de change, fédéralisme budgétaire et redistribution : comment s’ajuster en union monétaire?," Post-Print hal-01397604, HAL.
- Jacques Mazier & Vincent Duwicquet & Jamel Saadaoui, 2013. "Désajustements de change, fédéralisme budgétaire et redistribution: comment s'ajuster en union monétaire?," Post-Print hal-01367464, HAL.
- Vincent Duwicquet & Jacques Mazier & Jamel Saadaoui, 2012. "Désajustements de change, fédéralisme budgétaire et redistribution : comment s'ajuster en union monétaire," CEPN Working Papers halshs-00735142, HAL.
- 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.
- Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010. "Exchange Rate Misalignments at World and European Levels: a FEER Approach," Post-Print halshs-00435836, HAL.
- 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.
- 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.
- 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.
- 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.
- Pierfederico Asdrubali & Soyoung Kim, 2000. "Dynamic Risk Sharing in the United States and Europe," Econometric Society World Congress 2000 Contributed Papers 1621, Econometric Society.
- 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.
- 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)
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 references are entirely missing, you can add them using this form.
- Duwicquet, Vincent & Mazier, Jacques & Saadaoui, Jamel, 2012. "Désajustements de change, fédéralisme budgétaire et redistribution : comment s’ajuster en union monétaire