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Comparing post-crisis dynamics across Euro Area countries with the Global Multi-country model

Alice Albonico (), Ludovic Calès (), Roberta Cardani (), Olga Croitorov, Filippo Ferroni (), Massimo Giovannini, Stefan Hohberger, Beatrice Pataracchia, Filippo Maria Pericoli (), Rafal Raciborski, Marco Ratto (), Werner Roeger and Lukas Vogel ()

Economic Modelling, 2019, vol. 81, issue C, 242-273

Abstract: Following the global financial crisis, the Euro Area (EA) has experienced a persistent slump and notable trade balance adjustments, but with pronounced differences across EA Member States. We estimate a multi-country structural macroeconomic model to assess and compare the main drivers of GDP growth and trade balance adjustment across Germany, France, Italy, and Spain. We find that the pronounced post-crisis slump in Italy and Spain was mainly driven by positive saving shocks (‘deleveraging’) and by an increase in investment and intra-euro risk premia. Fiscal austerity in Spain and the productivity slowdown in Italy have been additional sizable contributors to the economic downturn. The results further suggest that euro depreciation, heightened intra-euro risk premia and subdued investment had a sizable impact on the trade balance reversals in Italy and Spain, which has been offset in France by a strong increase in imports and lower exports.

Keywords: Post-crisis dynamics; Trade balance; EMU; Estimated DSGE; Cross-country comparison (search for similar items in EconPapers)
JEL-codes: C5 E2 E3 E5 E6 F3 F4 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:81:y:2019:i:c:p:242-273

DOI: 10.1016/j.econmod.2019.04.016

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