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Defining the right internal exchange rate

Author

Listed:
  • Xavier Timbeau

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Lars Anderson
  • Christophe Blot

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Jérôme Creel

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Andrew Watt

Abstract

European economies need to adjust to a sustainable growth path. That implies adjusting internal exchange rates. Since the start of the Great Recession, euro area crisis countries (and more specifically Greece, Portugal, Spain, Italy, Ireland) have engaged in austerity policies in order to slash public deficits, but also in attempt to regain lost competitiveness. These policies, by weighing on internal demand and growth, have successively pushed euro area countries into competitive disinflation policies. This non-cooperative game, whose goal is to win market shares against euro area partners by improving the country's price-competitiveness, has already had sharp disinflationary effects and runs the risk of pushing the euro area economy into deflation, a threat already identified in last year's iAGS report. (First paragraph)

Suggested Citation

  • Xavier Timbeau & Lars Anderson & Christophe Blot & Jérôme Creel & Andrew Watt, 2015. "Defining the right internal exchange rate," Post-Print hal-03473710, HAL.
    • Handle: RePEc:hal:journl:hal-03473710
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03473710
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    Keywords

    internal exchange rate;

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