Macroeconomic imbalances and structural change in the EMU

Stefan Ederer and Peter Reschenhofer

Structural Change and Economic Dynamics, 2018, vol. 46, issue C, 59-69

Abstract: Macroeconomic imbalances in the EMU are at the heart of the current crisis. One explanation for the high current account deficits in the Southern European countries is that they lack a large, competitive and export-oriented industrial sector. The paper tests the hypothesis that parts of the structural change which happened in the EU before 2008 were supported by the divergent unit labour cost developments in the EMU. We look into patterns of structural change and sectoral competitiveness in all EU member countries and assess their linkages by means of a descriptive analysis as well as through econometric estimations. Our results broadly support the hypothesis. Industrial policy, which aims at fostering new competitive export-oriented industries in Southern Europe in order to reduce macroeconomic imbalances in the EMU, should thus be combined with adjustments in relative labour costs.

Keywords: Macroeconomic imbalances; Structural change; Labour costs; Dynamic panel regression (search for similar items in EconPapers)
JEL-codes: C33 F41 J31 O40 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:46:y:2018:i:c:p:59-69

DOI: 10.1016/j.strueco.2018.04.002

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