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The adjustment mechanism in the Euro Area

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  • Pietro Biroli
  • Gilles Mourre
  • Alessandro Turrini

Abstract

This paper analyses the adjustment mechanism in the euro area prior to the crisis. Results show that the real exchange rate adjusted to redress cyclical divergences and that after monetary unification, real exchange rate dynamics became less reactive to country-specific shocks but also less persistent. Regulations affecting price and wage nominal flexibility and employment protection play a role in the adjustment mechanism. Indicators of product and labour regulations appear to matter for both the reaction of price competitiveness to cyclical divergences and for the inertia of competitiveness indicators. © 2013 ZBW and Springer-Verlag Berlin Heidelberg.

Suggested Citation

  • Pietro Biroli & Gilles Mourre & Alessandro Turrini, 2013. "The adjustment mechanism in the Euro Area," ULB Institutional Repository 2013/168422, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/168422
    Note: SCOPUS: ar.j
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    Cited by:

    1. Furceri, Davide & Loungani, Prakash & Pizzuto, Pietro, 2022. "Moving closer? Comparing regional adjustments to shocks in EMU and the United States," Journal of International Money and Finance, Elsevier, vol. 120(C).
    2. Kamila Gawel & Maksym Lozovyi & Mohammad Hossain Bhuiyan & Ruben Bjørge & Erling Fjær, 2021. "Acid Treatment as a Way to Reduce Shale Rock Mechanical Strength and to Create a Material Prone to the Formation of Permanent Well Barrier," Energies, MDPI, vol. 14(9), pages 1-14, April.

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