Network analysis and Eurozone trade imbalances

Giovanni Carnazza and Pierluigi Vellucci

Papers from arXiv.org

Abstract: European Monetary Union continues to be characterised by significant macroeconomic imbalances. Germany has shown increasing current account surpluses at the expense of the other member states (especially the European periphery). Since the creation of a single currency has implied the impossibility of implementing competitive devaluations, trade imbalances within a monetary union can be considered unfair behaviour. We have modelled Eurozone trade flows in goods through a weighted network from 1995 to 2019. To the best of our knowledge, this is the first work that applies this methodology to this kind of data. Network analysis has allowed us to estimate a series of important centrality measures. A polarisation phenomenon emerges in relation to the growth of German dominance. The common currency has then not been capable to remove trade asymmetry, increasing the distance between surplus and deficit countries. This situation should be addressed with expansionary policies on the demand side at national and supranational level.

Date: 2022-09
New Economics Papers: this item is included in nep-eec, nep-int and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2209.09837

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