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Unbundling the Great European Recession (2009-2013): Unemployment, Consumption, Investment, Inflation and Current Account

  • Campiglio, Luigi Pierfranco

The aim of the paper is to unbundle the main economic variables involved in the European Crisis and clarify their reciprocal relationship. The variable considered are: unemployment, inflation, consumptions, investments and current accounts. We use annual, quarterly and monthly data, until 2012, mid-2013 or an estimate of 2013 for the main European countries. The main results are the following: a) we show an emerging European economic divide, b) we detect a quasi-Okun relationship between investment and unemployment, c) we show the revival of the Phillips curve, especially in Germany, d) we test for the relationship between unemployment and the Government deficit, e) we show the existence of a relationship between unemployment and current account, f) we show how countries with high unemployment rate could bear the burden, g) we unbundle the unemployment-current account relationship, showing first the relationship between unemployment and final consumption, h) and then between final consumption, imports and corrent account, i) we show why a stable and growing inflation differential is not sustainable, but argue that internal devalution is not an effective policy, pushing inflation rates to a worrisome lower level and even outright deflation, l) we argue and show how to implement a more effective policy looking to the inflation differentials of specific products, looking to the case of Italy, m) we analyze the trade relationship between Germany and China, arguing that since the onset of the EMU and the successive membership of China to the WTO a European structural break occurred, with some European countries relying much more on exports rather than domestic demand. A more general issue of sustainability and replicability of the Germany’s export led growth model is raised.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53002.

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Date of creation: Jan 2014
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Handle: RePEc:pra:mprapa:53002
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  1. Luigi Pierfranco Campiglio, 2014. "Unbundling the Great European Recession (2009-2013): Unemployment, Consumption, Investment, Inflation and Current Account," DISCE - Quaderni dell'Istituto di Politica Economica ispe0067, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  2. Maurizio Motolese, 2003. "Endogenous uncertainty and the non-neutrality of money," Economic Theory, Springer, vol. 21(2), pages 317-345, 03.
  3. Carsten Krabbe Nielsen, 2004. "Rational overconfidence and excess volatility in general equilibrium," Econometric Society 2004 Latin American Meetings 157, Econometric Society.
  4. Robert Kollmann & Marco Ratto & Werner Roeger & Jan in’t Veld & Lukas Vogel, 2014. "What drives the German current account? And how does it affect other EU member states?," CAMA Working Papers 2014-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. Carsten K. Nielsen, 2009. "Optimal economic institutions under rational overconfidence, with applications to the choice of exchange rate regime," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(4), pages 375-407.
  6. Edward S. Knotek & II, 2007. "How useful is Okun's law?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 73-103.
  7. Marta Spreafico, 2010. "What do we know about the link between growth and institutions?," DISCE - Quaderni dell'Istituto di Politica Economica ISPE0053, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  8. Francesco Vito, 2011. "World Depression and the Crisis of Economic Theory," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 119(3/4), pages 349-356.
  9. Raul Caruso & Marco Di Domizio, 2012. "Hooliganism and demand for football in Italy. Evidence for the period 1962-2011," DISCE - Quaderni dell'Istituto di Politica Economica ispe0062, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  10. Vito Ettore Moramarco, 2011. "Le determinanti politico-economiche della distribuzione interregionale della spesa pubblica," DISCE - Quaderni dell'Istituto di Politica Economica ISPE0056, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  11. Luigi CAMPIGLIO, 2006. "Interessi economici, potere politico e rappresentanza parlamentare in Italia nel periodo 1948-2002," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 114(1-2), pages 37-66.
  12. Giuseppina Malerba & Marta Spreafico, 2013. "Income inequality in the European Union: evidence from a panel analysis," DISCE - Quaderni dell'Istituto di Politica Economica ispe0065, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  13. Marta Spreafico, 2013. "Institutions, the resource curse and the transition economies: further evidence," DISCE - Quaderni dell'Istituto di Politica Economica ispe0064, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  14. Marco Arnone & Carlo Bellavite Pellegrini & Franco Timpano, 2004. "Modelli di Agenzie di Sviluppo Regionale: Analisi Teorica ed Evidenza Empirica," Development and Comp Systems 0404004, EconWPA.
  15. Luigi Pierfranco Campiglio, 2013. "Why Italy's saving rate became (so) low?," DISCE - Quaderni dell'Istituto di Politica Economica ispe0063, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  16. Luigi Bonatti & Andrea Fracasso, 2012. "The costs of rebalancing the China-US co-dependency," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 120(1), pages 59-106.
  17. John S L McCombie & Marta Spreafico, 2013. "Can only democracies enhance “Human Development”? Evidence from the Former Soviet Countries," DISCE - Quaderni dell'Istituto di Politica Economica ispe0066, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  18. Quaas, Georg & Klein, Mathias, 2010. "Clusters and Loops of the German Phillips Curve," MPRA Paper 23094, University Library of Munich, Germany.
  19. Raul Caruso, 2012. "Differentials in property Rights in a two-sector economy," Revue d'économie politique, Dalloz, vol. 122(2), pages 257-278.
  20. Luigi Pierfranco Campiglio, 2012. "Europa, crescita e sostenibilità: "e pluribus unum?"," DISCE - Quaderni dell'Istituto di Politica Economica ispe0059, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  21. Paul Krugman, 2012. "Revenge of the Optimum Currency Area," NBER Chapters, in: NBER Macroeconomics Annual 2012, Volume 27, pages 439-448 National Bureau of Economic Research, Inc.
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