Eurozone Imbalances: Measuring the Contribution of Expenditure Switching and Expenditure Volumes 1990-2013

Enno Schröder ()
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Enno Schröder: Institute for New Economic Thinking, 300 Park Avenue South, New York, NY 10010; Department of Economics, New School for Social Research

No 1508, Working Papers from New School for Social Research, Department of Economics

Abstract: This paper introduces a decomposition of the trade ratio. The dynamics of the trade ratio are composed of contributions from expenditure switching, from the terms of trade, and from relative expenditure (i.e. the ratio of foreign to domestic expenditure). Country-specific, dynamically tradeweighted indicators of foreign expenditure are constructed for use in the application of the decomposition to 11 euro area countries in 1990-2013. Over 1999-2007, Germany and Spain shared the same pattern of expenditure switching; the slack in German expenditure translated into trade surpluses and the boom in Spain into deficits; expenditure was being switched away from domestic output towards foreign output in every country except Austria, Greece, and Ireland; and the magnitude of this unfavorable switching was largest in Finland, France, and Italy.

Keywords: External adjustment; expenditure switching; competitiveness; decomposition; Euro area (search for similar items in EconPapers)
JEL-codes: F14 F32 F41 F43 F45 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2015-04, Revised 2015-09
New Economics Papers: this item is included in nep-eec and nep-int
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http://www.economicpolicyresearch.org/econ/2015/NSSR_WP_082015.pdf First version, 2015 (application/pdf)

Related works:
Working Paper: Euro Area Imbalances: Measuring the Contribution of Expenditure Growth and Expenditure Switching (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:1508

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