Current Accounts and Competitiveness Issues in the North and South of the Euro Area
Economic Imbalances and Institutional Changes to the Euro and the European Union
ISBN: 978-1-78714-510-8, eISBN: 978-1-78714-509-2
Publication date: 23 October 2017
Abstract
Asynchronous current account trends between North and South of the Euro Area were accompanied by significant appreciations of real exchange rate originating in the strong shifts in consumer prices and unit labor costs in the periphery economies relative to the core countries of the Euro Area. The issue is whether the real exchange rate is a significant driver of persisting current account imbalances in the Euro Area considering that, according to some authors, differences in domestic demand are more important than is often realized. In the paper we examine relative importance of real exchange rate and demand shocks according to the current account adjustments in the Euro Area member countries. Our results indicate that while the prices and costs related determinants of external competitiveness affected current account adjustments primarily during the pre-crisis period, demand drivers shaped current account balances mainly during the crisis period.
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Acknowledgements
Acknowledgment
This paper was written in connection with scientific project VEGA no. 1/0994/15. Financial support from this Ministry of Education’s scheme is also gratefully acknowledged.
Citation
Mirdala, R. and Ďurčová, J. (2017), "Current Accounts and Competitiveness Issues in the North and South of the Euro Area", Economic Imbalances and Institutional Changes to the Euro and the European Union (International Finance Review, Vol. 18), Emerald Publishing Limited, Leeds, pp. 243-276. https://doi.org/10.1108/S1569-376720170000018013
Publisher
:Emerald Publishing Limited
Copyright © 2017 Emerald Publishing Limited