The Impact of an Exchange Rate Realignment on the Italian Trade Balance: Euro vs. National Currency

Alberto Bagnai and Christian Alexander Mongeau Ospina

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2014, vol. 60, issue 4, 273-291

Abstract: It is frequently claimed that the current EUR/USD exchange rate is too high and that a depreciation of the EUR against the USD would help to relieve the Eurozone economy from its current state of persistent crisis. Evidence provided by the a/simmetrie annual econometric model suggests that this claim is unsupported by the data, at least as far as the Italian economy is concerned. In fact, the size and sign of the trade elasticities show that the increases in net exports towards non-Eurozone countries, brought about by the depreciation of the euro, would be offset by an increase in net imports from Eurozone countries, brought about by the increase in Italian domestic demand. To put it simply, in the event of a depreciation of the EUR, the Italian economy would not only suffer higher energy costs (because of the depreciation vis-à-vis OPEC countries), but would also spend in the Eurozone core much of the money it earned in the US, Japan, and the emerging countries, with a net effect likely to be almost zero or negative in the first three to four years.

Keywords: Exchange Rate Realignment; Euro vs. National Currency (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://dx.doi.org/10.3790/aeq.60.4.273 (application/pdf)
Access to full text is restricted to subscribers (2008 onwards); Pay-per-view access from https://elibrary.duncker-humblot.com/journals/aeq (2008 onwards) and http://www.genios.de (2008 onwards)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dah:aeqaeq:v60_y2014_i4_q4_p273-291

Ordering information: This journal article can be ordered from
https://www.duncker-humblot.de/zeitschriften/aeq

Access Statistics for this article

Applied Economics Quarterly (formerly: Konjunkturpolitik) is currently edited by Cinzia Alcidi, Christian Dreger and Daniel Gros

More articles in Applied Economics Quarterly (formerly: Konjunkturpolitik) from Duncker & Humblot GmbH, Berlin
Bibliographic data for series maintained by E-Publishing-Team ().