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Defining the right internal exchange rate: Chapter 5

Author

Listed:
  • Xavier Timbeau

    (Observatoire français des conjonctures économiques)

  • Lars Anderson

    (Economic Council of the Labour Movement)

  • Christophe Blot

    (Observatoire français des conjonctures économiques)

  • Jérôme Creel

    (Observatoire français des conjonctures économiques)

  • Andrew Watt

    (Macroeconomic Policy Institute (IMK))

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: Chapter 5," Sciences Po publications info:hdl:2441/4gda5db97k8, Sciences Po.
    • Handle: RePEc:spo:wpmain:info:hdl:2441/4gda5db97k8sjqlo8o2grqpv06
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    Keywords

    internal exchange rate;

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