On Currency Misalignments within the Euro Area

Coudert, Virginie; Couharde, Cécile; Mignon, Valérie

doi:10.1111/roie.12018

Cited by 52 publications

(53 citation statements)

References 39 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Lacking the tools of monetary policy, non-monetary indicators are used intending to generate similar effects to devaluation (Whelan, 2013;Ledesma-Rodrigues et al, 2005). These parameters are essentially increasing productivity (very difficult in the short term), or reducing labour costs (either wages or benefits) (Coudert et al, 2013;Guerrieri and Esposito, 2012;Holinski et al, 2012). So, countries can either reform labour law (Sánchez, 2012) to reduce the cost of labour or to contain corporate profit margins.…”

Section: The State-of-the-art: the Theoretical Frameworkmentioning

confidence: 99%

Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection

Picatoste

Benito

Laxe

2016

PIE

View full text Add to dashboard Cite

Abstract:The economic crisis that began in 2008 highlighted the difficulties faced by those national economies members of a monetary area. Such is the case of the countries in the euro area. In this situation, the possibilities of increasing the international competitiveness of the domestic economy are severely reduced. This paper presents a theoretical analysis of the fundamentals of real exchange rate and the factors influencing pricing, focusing on the degree of competition in the markets and the cost structure. It is undertaken through the study of maximising corporate profits, formation of labour costs and determinants of market structure; contextualised in a currency area. The findings clearly show that there are efficient policies that can be applied in order to increase domestic competitiveness through internal devaluation; nevertheless, the results show that a loss of purchasing power of workers will probably be the result, while corporate profit margins grow.

show abstract

Section: The State-of-the-art: the Theoretical Frameworkmentioning

confidence: 99%

Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection

Picatoste

Benito

Laxe

2016

PIE

View full text Add to dashboard Cite

show abstract

“…Firstly it considers specifically the EU as an overall group of advanced and transition countries using data updated to 2012, which includes the financial crisis and the sovereign debt crisis in the EU. The analysis is not restricted to the current euro area (Coudert et al, 2013) but sheds light on the REER determinants of possible new entrants (mainly EU-member CEECs) and compares EMU countries with other advanced countries of the EU with floating exchange rate regimes, such as Sweden or UK.…”

Section: This Paper Explores the Role Of Economic Fundamentals In Expmentioning

confidence: 99%

“…For instance, we would have expected in the peripheral member countries an overvalued exchange rate since the mid-2000s due to a worsening in productivity or in the external position (Coudert et al, 2013). This is the reason why we analyze a measure of the "equilibrium" exchange rate as a benchmark against which the actual development of the exchange rate can be judged (Maeso-Fernandez et al, 2002).…”

Section: This Paper Explores the Role Of Economic Fundamentals In Expmentioning

confidence: 99%

“…For the euro zone, the main reference is the paper by Coudert et al (2013), which focuses on the period 1980-2010 for 11 euro zone members, namely: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, and Spain. The "equilibrium" REER depends on a productivity variable and the NFA position (Bénassy-Quéré et al, 2009.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Long-Run Determinants and Misalignments of the Real Effective Exchange Rate in the EU

Comunale

2015

SSRN Journal

View full text Add to dashboard Cite

Exchange rate assessment is becoming increasingly relevant for economic surveillance in the EU. The persistence of different wage and productivity dynamics among EMU countries or EU members with a fixed exchange regime with euro, coupled with the impossibility of correcting competitiveness differentials via the adjustment of nominal rates, have resulted into divergent dynamics in Real Effective Exchange Rates. This paper explores the role of economic fundamentals in explaining medium/long-run movements in the Real Effective Exchange Rates in the European Union over the period 1994-2012 by using heterogeneous, cointegrated panel frameworks in static and dynamic terms. In addition, the paper provides an analysis of the misalignments of the rate for each member state based on the "equilibrium" measure calculated from the permanent component of the fundamentals (BEER). The misalignments in EU28 are huge and the patterns differ significantly among groups. Therefore, despite the influence of the fundamentals is quite similar, the differences in the transfer variable (which affect the BEER) and in the actual Real Effective Exchange Rate are key. The core countries have been undervalued for almost the whole period, which entails from an important increase in competitiveness for those countries. Instead the periphery has experienced high rates, especially in Portugal. In addition, the behavior of CEECs is driven, as expected, by the transition process and influenced by the criteria to the accession to the EU. The misalignments in this case are still extremely wide and reflect these phenomena.

show abstract

“…Economy of the member countries is very heterogeneous and, furthermore, we cannot talk about fiscal federalism in the EU. The euro seems overvalued for the southern European countries (including France) and underestimated for countries in Northern Europe, especially Germany (Coudert 2013;Duwicquet et al 2013). Financial markets may decide to refuse a loan to some countries, simply because the operation would be too risky.…”

Section: Introductionmentioning

confidence: 99%

The SGP – Faulty by Design or Made Faulty by Politicians? An Assessment Based on a Simulation Model

Horáková

Jahoda

2014

Review of Economic Perspectives

View full text Add to dashboard Cite

By joining the European Monetary Union (the "EMU"), member countries lost the ability to use monetary policy as a tool for macroeconomic regulation. The attention was then focused on regulation of fiscal policy and Stability and Growth Pact (the "SGP") was the instrument agreed upon. The states of the EMU have agreed to meet the 3% of GDP requirement for the maximum annual public budget deficit. Based on evolution of public debt in member countries, we can say that the SGP has failed as a tool for fiscal discipline. In this paper, we answer the question of whether the failure was due to the incorrect concept of the SGP or whether the development of the debt was affected more by arbitrary disrespect of the agreed rules. The two reasons mentioned above are interdependent. To separate them, we construct a dynamic model of EU countries' public debt. By using real data, we simulate the potential values of public debt in a situation where the SGP rules have been respected in recent years. Comparing the results for the potential debt given by simulation of the model with the current real values, we are able to quantify the impact of non-compliance for each country. The initial results indicate that there are both EU states where non-compliance led to a negligible increase in public debt -up to 7% of GDP -and other states where this factor caused the growth of public debt by more than 30% of GDP.

show abstract

On Currency Misalignments within the Euro Area

Cited by 52 publications

References 39 publications

Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection

Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection

Long-Run Determinants and Misalignments of the Real Effective Exchange Rate in the EU

The SGP – Faulty by Design or Made Faulty by Politicians? An Assessment Based on a Simulation Model

Contact Info

Product

Resources

About