Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications
The paper assesses the contribution of key factors associated with external imbalances in the Eurozone through the estimation of a panel-data vector autoregressive model over 1975-2011. Growth fluctuations, initially associated with demand booms tr...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2013/12/18717042/growth-competitiveness-factors-eurozone-external-imbalances-evidence-policy-implications http://hdl.handle.net/10986/16900 |
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okr-10986-16900 |
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oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING ASSETS AVAILABILITY OF CREDIT BANKING SECTOR BANKING SYSTEM BILATERAL TRADE BOND BORROWING COSTS BUDGET CONSTRAINT BUDGET DEFICITS CAPITAL ACCUMULATION CAPITAL FLIGHT CAPITAL FLOWS CAPITAL INFLOWS CENTRAL BANK COMMERCIAL BANKS COMMON CURRENCY COMPETITIVENESS CONSUMER PRICE INDEX CONSUMER PRICE INFLATION CONSUMERS CONSUMPTION SMOOTHING CREDIT BOOM CREDIT BOOMS CREDIT GROWTH CREDIT MARKET CREDIT MARKETS CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT IMBALANCES CURRENT ACCOUNT SURPLUS CURRENT ACCOUNT SURPLUSES CURRENT ACCOUNTS DEBT CRISIS DEBT REPAYMENT DEBTOR DEBTOR COUNTRIES DEPENDENCY RATIO DEPENDENCY RATIOS DEPRECIATION DEREGULATION DEVALUATION DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIMINISHING RETURNS DISCOUNT RATE DISTORTIONS DOMESTIC DEMAND DOMESTIC DEMAND GROWTH DOMESTIC SAVINGS ECONOMETRICS ECONOMIC CONTRACTION ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC INTEGRATION ECONOMIC MODEL ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC RELATIONS ECONOMIC SIZE ELASTICITY EMERGING MARKET EMERGING MARKET ECONOMIES ENDOGENOUS VARIABLE ENDOGENOUS VARIABLES ENFORCEMENT MECHANISM EQUILIBRIUM ERROR CORRECTION MODEL EXCESS DEMAND EXCHANGE RATE EXCHANGE RATE DETERMINATION EXCHANGE RATE RISK EXOGENOUS VARIABLE EXPORTS EXTERNAL BALANCE EXTERNAL BALANCES EXTERNAL BORROWING EXTERNAL COMPETITIVENESS EXTERNAL DEBT EXTERNAL DEBTS EXTERNAL DEFICIT EXTERNAL DEFICITS EXTERNAL DEMAND FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL CRISIS FINANCIAL INTEGRATION FINANCIAL SECTOR FISCAL BALANCE FISCAL BALANCES FISCAL DEFICIT FISCAL DEFICITS FISCAL DISCIPLINE FISCAL IMBALANCES FISCAL POLICIES FISCAL POLICY FISCAL POSITIONS FIXED EFFECTS FIXED INCOME FOREIGN DEBT FUNDAMENTAL DETERMINANTS GDP GDP PER CAPITA GOVERNMENT BONDS GOVERNMENT SPENDING HUMAN CAPITAL IMBALANCE IMBALANCES IMPORTS INCOME GROWTH INDEPENDENT MONETARY POLICY INFLATION INFLATION RATE INSTRUMENTAL VARIABLE INTEREST PAYMENTS INTEREST RATE DIFFERENTIALS INTEREST RATES INTEREST-RATE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL MONEY INVESTMENT BOOM INVESTMENT RATE INVESTMENT RATES INVESTMENT RATIO LABOR FORCE LABOR MARKET LABOR MARKETS LACK OF COMPETITION LESS DEVELOPED COUNTRIES LEVERAGE LOAN LONG-TERM INTEREST LOSS OF COMPETITIVENESS LOSS OF REVENUE LOW INTEREST RATES MACROECONOMICS MARKET DEVELOPMENTS MARKET EQUILIBRIUM MARKET REFORMS MISALIGNMENT MONETARY POLICY MONETARY UNION MORTGAGE NOMINAL INTEREST RATE NOMINAL WAGE OIL PRODUCING COUNTRIES OPEN ECONOMY PER CAPITA INCOME PER CAPITA INCOMES POLICY ON EXCHANGE RATES POLITICAL STRIFE PRICE COMPETITIVENESS PRICE INDEX PRICE STABILITY PRODUCTIVITY PRODUCTIVITY GROWTH PUBLIC DEBT PUBLIC EXPENDITURE PUBLIC INVESTMENTS PUBLIC SPENDING REAL EFFECTIVE EXCHANGE RATE REAL EFFECTIVE EXCHANGE RATES REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXCHANGE RATE MOVEMENTS REAL EXCHANGE RATES REAL GDP REAL INCOME REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES REAL LONG-TERM INTEREST RATE REAL LONG-TERM INTEREST RATES REAL WAGE GROWTH RECESSION RELATIVE PRICE REPAYMENT SAVINGS RATE SAVINGS RATES SLOWDOWNS SMOOTHING CONSUMPTION SOVEREIGN DEBT SOVEREIGN RISK STANDARD DEVIATION STRONG DEMAND STRUCTURAL REFORM STRUCTURAL REFORMS STRUCTURAL SHOCKS SUPPLY-SIDE SURPLUS COUNTRIES SURPLUSES TAX TAX REVENUES TIME HORIZON TRADABLE GOODS TRADE BALANCE TRADE BALANCES TRADE SHOCKS TRADING TRADING PARTNERS UNCOVERED INTEREST RATE PARITY UTILITY FUNCTION VARIANCE-COVARIANCE MATRIX WAGES WARRANTS WORLD MARKETS |
| spellingShingle |
ACCOUNTING ASSETS AVAILABILITY OF CREDIT BANKING SECTOR BANKING SYSTEM BILATERAL TRADE BOND BORROWING COSTS BUDGET CONSTRAINT BUDGET DEFICITS CAPITAL ACCUMULATION CAPITAL FLIGHT CAPITAL FLOWS CAPITAL INFLOWS CENTRAL BANK COMMERCIAL BANKS COMMON CURRENCY COMPETITIVENESS CONSUMER PRICE INDEX CONSUMER PRICE INFLATION CONSUMERS CONSUMPTION SMOOTHING CREDIT BOOM CREDIT BOOMS CREDIT GROWTH CREDIT MARKET CREDIT MARKETS CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT IMBALANCES CURRENT ACCOUNT SURPLUS CURRENT ACCOUNT SURPLUSES CURRENT ACCOUNTS DEBT CRISIS DEBT REPAYMENT DEBTOR DEBTOR COUNTRIES DEPENDENCY RATIO DEPENDENCY RATIOS DEPRECIATION DEREGULATION DEVALUATION DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIMINISHING RETURNS DISCOUNT RATE DISTORTIONS DOMESTIC DEMAND DOMESTIC DEMAND GROWTH DOMESTIC SAVINGS ECONOMETRICS ECONOMIC CONTRACTION ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC INTEGRATION ECONOMIC MODEL ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC RELATIONS ECONOMIC SIZE ELASTICITY EMERGING MARKET EMERGING MARKET ECONOMIES ENDOGENOUS VARIABLE ENDOGENOUS VARIABLES ENFORCEMENT MECHANISM EQUILIBRIUM ERROR CORRECTION MODEL EXCESS DEMAND EXCHANGE RATE EXCHANGE RATE DETERMINATION EXCHANGE RATE RISK EXOGENOUS VARIABLE EXPORTS EXTERNAL BALANCE EXTERNAL BALANCES EXTERNAL BORROWING EXTERNAL COMPETITIVENESS EXTERNAL DEBT EXTERNAL DEBTS EXTERNAL DEFICIT EXTERNAL DEFICITS EXTERNAL DEMAND FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL CRISIS FINANCIAL INTEGRATION FINANCIAL SECTOR FISCAL BALANCE FISCAL BALANCES FISCAL DEFICIT FISCAL DEFICITS FISCAL DISCIPLINE FISCAL IMBALANCES FISCAL POLICIES FISCAL POLICY FISCAL POSITIONS FIXED EFFECTS FIXED INCOME FOREIGN DEBT FUNDAMENTAL DETERMINANTS GDP GDP PER CAPITA GOVERNMENT BONDS GOVERNMENT SPENDING HUMAN CAPITAL IMBALANCE IMBALANCES IMPORTS INCOME GROWTH INDEPENDENT MONETARY POLICY INFLATION INFLATION RATE INSTRUMENTAL VARIABLE INTEREST PAYMENTS INTEREST RATE DIFFERENTIALS INTEREST RATES INTEREST-RATE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL MONEY INVESTMENT BOOM INVESTMENT RATE INVESTMENT RATES INVESTMENT RATIO LABOR FORCE LABOR MARKET LABOR MARKETS LACK OF COMPETITION LESS DEVELOPED COUNTRIES LEVERAGE LOAN LONG-TERM INTEREST LOSS OF COMPETITIVENESS LOSS OF REVENUE LOW INTEREST RATES MACROECONOMICS MARKET DEVELOPMENTS MARKET EQUILIBRIUM MARKET REFORMS MISALIGNMENT MONETARY POLICY MONETARY UNION MORTGAGE NOMINAL INTEREST RATE NOMINAL WAGE OIL PRODUCING COUNTRIES OPEN ECONOMY PER CAPITA INCOME PER CAPITA INCOMES POLICY ON EXCHANGE RATES POLITICAL STRIFE PRICE COMPETITIVENESS PRICE INDEX PRICE STABILITY PRODUCTIVITY PRODUCTIVITY GROWTH PUBLIC DEBT PUBLIC EXPENDITURE PUBLIC INVESTMENTS PUBLIC SPENDING REAL EFFECTIVE EXCHANGE RATE REAL EFFECTIVE EXCHANGE RATES REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXCHANGE RATE MOVEMENTS REAL EXCHANGE RATES REAL GDP REAL INCOME REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES REAL LONG-TERM INTEREST RATE REAL LONG-TERM INTEREST RATES REAL WAGE GROWTH RECESSION RELATIVE PRICE REPAYMENT SAVINGS RATE SAVINGS RATES SLOWDOWNS SMOOTHING CONSUMPTION SOVEREIGN DEBT SOVEREIGN RISK STANDARD DEVIATION STRONG DEMAND STRUCTURAL REFORM STRUCTURAL REFORMS STRUCTURAL SHOCKS SUPPLY-SIDE SURPLUS COUNTRIES SURPLUSES TAX TAX REVENUES TIME HORIZON TRADABLE GOODS TRADE BALANCE TRADE BALANCES TRADE SHOCKS TRADING TRADING PARTNERS UNCOVERED INTEREST RATE PARITY UTILITY FUNCTION VARIANCE-COVARIANCE MATRIX WAGES WARRANTS WORLD MARKETS Diaz Sanchez, Jose Luis Varoudakis, Aristomene Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications |
| geographic_facet |
Europe and Central Asia |
| relation |
Policy Research Working Paper;No. 6732 |
| description |
The paper assesses the contribution of
key factors associated with external imbalances in the
Eurozone through the estimation of a panel-data vector
autoregressive model over 1975-2011. Growth fluctuations,
initially associated with demand booms triggered by
unusually low interest rates and later with demand
contractions resulting from the crisis and policy
adjustments, have been key drivers of current account
fluctuations. Changes in competitiveness, measured by real
exchange rates or unit labor costs, have played a less
important role. Demand shocks have contributed more to
current account balance dynamics in the Eurozone periphery
than in the core, whereas competitiveness has been a less
prominent factor in the periphery but relatively more
important in the core. Changes in competitiveness are
positively associated with changes in growth. Preventing
imbalances from building up in a context of growing
financial integration and easy finance warrants enhanced
mutual surveillance of fiscal imbalances, but also better
regulation of credit markets to prevent excess leverage and
concentration of lending in investments prone to speculative
bubbles. Coordination of fiscal policy across the Eurozone
would facilitate the management of external imbalances
without placing an often unwarranted burden on fiscal
tightening in countries with sound fiscal positions affected
by credit booms. The policies of internal devaluation
implemented in the periphery, aimed at promoting external
competitiveness, may have had only limited effectiveness in
restoring the external balance to equilibrium. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Diaz Sanchez, Jose Luis Varoudakis, Aristomene |
| author_facet |
Diaz Sanchez, Jose Luis Varoudakis, Aristomene |
| author_sort |
Diaz Sanchez, Jose Luis |
| title |
Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications |
| title_short |
Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications |
| title_full |
Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications |
| title_fullStr |
Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications |
| title_full_unstemmed |
Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications |
| title_sort |
growth and competitiveness as factors of eurozone external imbalances : evidence and policy implications |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2013/12/18717042/growth-competitiveness-factors-eurozone-external-imbalances-evidence-policy-implications http://hdl.handle.net/10986/16900 |
| _version_ |
1764434939216920576 |
| spelling |
okr-10986-169002021-04-23T14:03:33Z Growth and Competitiveness as Factors of Eurozone External Imbalances : Evidence and Policy Implications Diaz Sanchez, Jose Luis Varoudakis, Aristomene ACCOUNTING ASSETS AVAILABILITY OF CREDIT BANKING SECTOR BANKING SYSTEM BILATERAL TRADE BOND BORROWING COSTS BUDGET CONSTRAINT BUDGET DEFICITS CAPITAL ACCUMULATION CAPITAL FLIGHT CAPITAL FLOWS CAPITAL INFLOWS CENTRAL BANK COMMERCIAL BANKS COMMON CURRENCY COMPETITIVENESS CONSUMER PRICE INDEX CONSUMER PRICE INFLATION CONSUMERS CONSUMPTION SMOOTHING CREDIT BOOM CREDIT BOOMS CREDIT GROWTH CREDIT MARKET CREDIT MARKETS CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT BALANCES CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT IMBALANCES CURRENT ACCOUNT SURPLUS CURRENT ACCOUNT SURPLUSES CURRENT ACCOUNTS DEBT CRISIS DEBT REPAYMENT DEBTOR DEBTOR COUNTRIES DEPENDENCY RATIO DEPENDENCY RATIOS DEPRECIATION DEREGULATION DEVALUATION DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIMINISHING RETURNS DISCOUNT RATE DISTORTIONS DOMESTIC DEMAND DOMESTIC DEMAND GROWTH DOMESTIC SAVINGS ECONOMETRICS ECONOMIC CONTRACTION ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC INTEGRATION ECONOMIC MODEL ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC RELATIONS ECONOMIC SIZE ELASTICITY EMERGING MARKET EMERGING MARKET ECONOMIES ENDOGENOUS VARIABLE ENDOGENOUS VARIABLES ENFORCEMENT MECHANISM EQUILIBRIUM ERROR CORRECTION MODEL EXCESS DEMAND EXCHANGE RATE EXCHANGE RATE DETERMINATION EXCHANGE RATE RISK EXOGENOUS VARIABLE EXPORTS EXTERNAL BALANCE EXTERNAL BALANCES EXTERNAL BORROWING EXTERNAL COMPETITIVENESS EXTERNAL DEBT EXTERNAL DEBTS EXTERNAL DEFICIT EXTERNAL DEFICITS EXTERNAL DEMAND FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL CRISIS FINANCIAL INTEGRATION FINANCIAL SECTOR FISCAL BALANCE FISCAL BALANCES FISCAL DEFICIT FISCAL DEFICITS FISCAL DISCIPLINE FISCAL IMBALANCES FISCAL POLICIES FISCAL POLICY FISCAL POSITIONS FIXED EFFECTS FIXED INCOME FOREIGN DEBT FUNDAMENTAL DETERMINANTS GDP GDP PER CAPITA GOVERNMENT BONDS GOVERNMENT SPENDING HUMAN CAPITAL IMBALANCE IMBALANCES IMPORTS INCOME GROWTH INDEPENDENT MONETARY POLICY INFLATION INFLATION RATE INSTRUMENTAL VARIABLE INTEREST PAYMENTS INTEREST RATE DIFFERENTIALS INTEREST RATES INTEREST-RATE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL MONEY INVESTMENT BOOM INVESTMENT RATE INVESTMENT RATES INVESTMENT RATIO LABOR FORCE LABOR MARKET LABOR MARKETS LACK OF COMPETITION LESS DEVELOPED COUNTRIES LEVERAGE LOAN LONG-TERM INTEREST LOSS OF COMPETITIVENESS LOSS OF REVENUE LOW INTEREST RATES MACROECONOMICS MARKET DEVELOPMENTS MARKET EQUILIBRIUM MARKET REFORMS MISALIGNMENT MONETARY POLICY MONETARY UNION MORTGAGE NOMINAL INTEREST RATE NOMINAL WAGE OIL PRODUCING COUNTRIES OPEN ECONOMY PER CAPITA INCOME PER CAPITA INCOMES POLICY ON EXCHANGE RATES POLITICAL STRIFE PRICE COMPETITIVENESS PRICE INDEX PRICE STABILITY PRODUCTIVITY PRODUCTIVITY GROWTH PUBLIC DEBT PUBLIC EXPENDITURE PUBLIC INVESTMENTS PUBLIC SPENDING REAL EFFECTIVE EXCHANGE RATE REAL EFFECTIVE EXCHANGE RATES REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXCHANGE RATE MOVEMENTS REAL EXCHANGE RATES REAL GDP REAL INCOME REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES REAL LONG-TERM INTEREST RATE REAL LONG-TERM INTEREST RATES REAL WAGE GROWTH RECESSION RELATIVE PRICE REPAYMENT SAVINGS RATE SAVINGS RATES SLOWDOWNS SMOOTHING CONSUMPTION SOVEREIGN DEBT SOVEREIGN RISK STANDARD DEVIATION STRONG DEMAND STRUCTURAL REFORM STRUCTURAL REFORMS STRUCTURAL SHOCKS SUPPLY-SIDE SURPLUS COUNTRIES SURPLUSES TAX TAX REVENUES TIME HORIZON TRADABLE GOODS TRADE BALANCE TRADE BALANCES TRADE SHOCKS TRADING TRADING PARTNERS UNCOVERED INTEREST RATE PARITY UTILITY FUNCTION VARIANCE-COVARIANCE MATRIX WAGES WARRANTS WORLD MARKETS The paper assesses the contribution of key factors associated with external imbalances in the Eurozone through the estimation of a panel-data vector autoregressive model over 1975-2011. Growth fluctuations, initially associated with demand booms triggered by unusually low interest rates and later with demand contractions resulting from the crisis and policy adjustments, have been key drivers of current account fluctuations. Changes in competitiveness, measured by real exchange rates or unit labor costs, have played a less important role. Demand shocks have contributed more to current account balance dynamics in the Eurozone periphery than in the core, whereas competitiveness has been a less prominent factor in the periphery but relatively more important in the core. Changes in competitiveness are positively associated with changes in growth. Preventing imbalances from building up in a context of growing financial integration and easy finance warrants enhanced mutual surveillance of fiscal imbalances, but also better regulation of credit markets to prevent excess leverage and concentration of lending in investments prone to speculative bubbles. Coordination of fiscal policy across the Eurozone would facilitate the management of external imbalances without placing an often unwarranted burden on fiscal tightening in countries with sound fiscal positions affected by credit booms. The policies of internal devaluation implemented in the periphery, aimed at promoting external competitiveness, may have had only limited effectiveness in restoring the external balance to equilibrium. 2014-02-04T21:04:20Z 2014-02-04T21:04:20Z 2013-12 http://documents.worldbank.org/curated/en/2013/12/18717042/growth-competitiveness-factors-eurozone-external-imbalances-evidence-policy-implications http://hdl.handle.net/10986/16900 English en_US Policy Research Working Paper;No. 6732 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia |