IDEAS home Printed from https://ideas.repec.org/p/ise/remwps/wp04162026.html

Trade imbalances, domestic demand and export composition in peripheral and core Eurozone countries, before and after the sovereign debt crisis: An input-output approach

Author

Listed:
  • João Carlos Lopes

Abstract

The great recession of 2008/2009 and the subsequent sovereign debt crisis highlighted the existence of deep structural imbalances in the Eurozone: large differences of competitiveness and growth potential between its northern (core) and southern (peripheral) countries. In this paper, an input-output approach is used to study two important facets of this phenomenon, namely the nexus between current account (trade) imbalances and domestic (final) demand levels, as well as the sectoral specialization of tradable goods and services production. In the uncompetitive (current account deficit) economies of southern euro area, domestic final demand levels before the crisis were excessive and the opposite occurred in the strong, competitive economies of the north. These external imbalances were closely associated with a pattern of specialization favourable to the northern euro area countries (sectors with higher value added and more intensive technological activities). The empirical results of the paper for the period before the crisis, are based on input-output tables for several years: 1995, 2000, 2005 and 2011, available in the World Input Output Database. The northern euro area group is formed by Germany, Netherlands Finland and Ireland. The southern one is the so-called GIPS group (Greece, Italy, Portugal and Spain). After the (Troika) adjustment programs of 2011/2014, the external imbalances were overcome, by a strong demand compression initially and an export led orientation thereafter. This correction is shown for the Portuguese case, using 2013 and 2017 inputoutput tables for this country and a comparison is made with Germany, the reference country of the core Eurozone group.

Suggested Citation

  • João Carlos Lopes, 2026. "Trade imbalances, domestic demand and export composition in peripheral and core Eurozone countries, before and after the sovereign debt crisis: An input-output approach," Working Papers REM 2026/0416, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp04162026
    as

    Download full text from publisher

    File URL: https://rem.rc.iseg.ulisboa.pt/wps/pdf/REM_WP_0416_2026.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ricardo Reis, 2015. "Looking for a Success in the Euro Crisis Adjustment Programs: The Case of Portugal," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 433-458.
    2. J�rg Bibow, 2013. "The Euroland crisis and Germany's euro trilemma," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(3), pages 360-385, May.
    3. Servaas Storm & C.W.M. Naastepad, 2016. "Myths, Mix-ups, and Mishandlings: Understanding the Eurozone Crisis," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(1), pages 46-71, January.
    4. Emiliano Brancaccio, 2012. "Current Account Imbalances, the Eurozone Crisis, and a Proposal for a "European Wage Standard"," International Journal of Political Economy, Taylor & Francis Journals, vol. 41(1), pages 47-65.
    5. Gustav A. Horn & Fabian Lindner & Sabine Stephan, 2017. "The Role of nominal wages in trade and current account surpluses," IMK Report 125e-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. Vassilis Monastiriotis & Cigdem Borke Tunali, 2020. "The Sustainability of External Imbalances in the European Periphery," Open Economies Review, Springer, vol. 31(2), pages 273-294, April.
    7. Nils Holinski & Clemens J. M. Kool & Joan Muysken, 2012. "Persistent macroeconomic imbalances in the Euro area: causes and consequences," Review, Federal Reserve Bank of St. Louis, vol. 94(Jan), pages 1-20.
    8. Nieminen, Mika, 2015. "Trade imbalances within the euro area and with respect to the rest of the world," Economic Modelling, Elsevier, vol. 48(C), pages 306-314.
    9. Ioannis Litsios & Keith Pilbeam, 2024. "Explaining and correcting trade imbalances between the Northern and Southern Eurozone: An empirical investigation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 1079-1096, January.
    10. Nadia Garbellini & Enrico Marelli & Ariel Luis Wirkierman, 2014. "Domestic demand and global production in the Eurozone: A multi-regional input-output assessment of the global crisis," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(3), pages 336-364, May.
    11. Sergio Cesaratto & Antonella Stirati, 2010. "Germany and the European and Global Crises," International Journal of Political Economy, Taylor & Francis Journals, vol. 39(4), pages 56-86.
    12. Mouhamadou Sy, 2016. "Overborrowing and Balance of Payments Imbalances in a Monetary Union," Review of International Economics, Wiley Blackwell, vol. 24(1), pages 67-98, February.
    13. Ricardo Reis, 2015. "Looking for a Success in the Euro Crisis Adjustment Programs: The Case of Portugal," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 433-458.
    14. Ms. Florence Jaumotte & Piyaporn Sodsriwiboon, 2010. "Current Account Imbalances in the Southern Euro Area," IMF Working Papers 2010/139, International Monetary Fund.
    15. Engelbert Stockhammer & Özlem Onaran, 2012. "Rethinking wage policy in the face of the Euro crisis. Implications of the wage-led demand regime," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(2), pages 191-203, September.
    16. Joong Shik Kang & Jay C. Shambaugh, 2016. "The rise and fall of European current account deficits," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 31(85), pages 153-199.
    Full references (including those not matched with items on IDEAS)

    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. Sergio Cesaratto, 2012. "Controversial and novel features of the Eurozone crisis as a balance of payment crisis," Department of Economics University of Siena 640, Department of Economics, University of Siena.
    2. Mitali Das, 2023. "Probabilistic assessment of external sustainability in Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(1), pages 5-29, January.
    3. 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.
    4. Walter Paternesi Meloni, 2021. "The price vs. non-price competitiveness conundrum: a post-Keynesian comparative political economy analysis," Working Papers PKWP2109, Post Keynesian Economics Society (PKES).
    5. 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.
    6. repec:spo:wpmain:info:hdl:2441/1divsbu8t888r9vqektjbmlqoa is not listed on IDEAS
    7. Jorge Sinval & M. Joseph Sirgy & Dong-Jin Lee & João Marôco, 2020. "The Quality of Work Life Scale: Validity Evidence from Brazil and Portugal," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 15(5), pages 1323-1351, November.
    8. Niels Gilbert & Sebastiaan Pool, 2020. "Sectoral allocation and macroeconomic imbalances in EMU," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 945-984, November.
    9. Yann Algan & Sergei Guriev & Elias Papaioannou & Evgenia Passari, 2017. "The European Trust Crisis and the Rise of Populism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(2 (Fall)), pages 309-400.
    10. Ionuţ JIANU & Laura-Mădălina PÎRȘCOVEANU & Maria-Daniela TUDORACHE, 2017. "The impact of financial risks on economic growth in EU-15," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 23-44, Spring.
    11. Alcobia, João & Sobreira, Nuno & Cabral, Ricardo, 2025. "What could have been? A synthetic control evaluation of the effect of the Economic and Monetary Union on the net external wealth of periphery member states," Economic Systems, Elsevier, vol. 49(3).
    12. Paternesi Meloni, Walter, 2016. "Austerity and competitiveness in the Eurozone: a misleading linkage," MPRA Paper 75962, University Library of Munich, Germany.
    13. M. Castro Campos & C. Kool & J. Muysken, 2013. "Cross-Country Private Saving Heterogeneity and Culture," De Economist, Springer, vol. 161(2), pages 101-120, June.
    14. Vicente Esteve & María A. Prats, 2023. "External sustainability in Spanish economy: Bubbles and crises, 1970–2020," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 60-80, February.
    15. Olivier Blanchard & Pedro Portugal, 2017. "Boom, slump, sudden stops, recovery, and policy options. Portugal and the Euro," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(3), pages 149-168, December.
    16. 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.
    17. Terzi, Alessio, 2020. "Macroeconomic adjustment in the euro area," European Economic Review, Elsevier, vol. 128(C).
    18. Florian Morvillier, 2018. "On the impact of the launch of the euro on EMU macroeconomic vulnerability," Working Papers hal-04141675, HAL.
    19. Roberto Veneziani & Luca Zamparelli & Michalis Nikiforos & Gennaro Zezza, 2017. "Stock-Flow Consistent Macroeconomic Models: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1204-1239, December.
    20. Nieminen, Mika, 2015. "Trade imbalances within the euro area and with respect to the rest of the world," Economic Modelling, Elsevier, vol. 48(C), pages 306-314.
    21. Nataliya Yu. Tanyushcheva, 2019. "Background of Anti-Money Laundering Regulation in Modern Economic Theory," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 96-107, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

    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:ise:remwps:wp04162026. 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: Sandra Araújo (email available below). General contact details of provider: https://rem.rc.iseg.ulisboa.pt/ .

    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.