 Nontradable sector reform and external rebalancing in monetary union: A model-based analysisEconomic Modelling, 2014, vol. 41, issue C, 421-434 Abstract: The paper uses the QUEST III model to analyse the question of whether nontradable (service) sector reform would reduce external imbalances in monetary union, notably from the side of surplus countries. It considers an open economy with a positive net foreign asset (net creditor) position and shows that tradable and nontradable sector reforms, understood as reforms that shift the supply curve in the respective sector outward, tend to have similar external balance effects. Namely, supply-side reforms improve the price competitiveness of domestic output and tend to increase the trade and current account balance on impact. In the longer term, competitiveness gains are compensated by additional imports associated with domestic income growth. Starting from a non-zero NFA position, the denominator effect does also contribute significantly to changes in external accounts relative to GDP. The results are robust across modifications of the model. Keywords: Nontradable sector; Product market reform; External rebalancing; Monetary union (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:41:y:2014:i:c:p:421-434 DOI: 10.1016/j.econmod.2013.10.038 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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