Benefits and spillovers of greater competition in Europe: a macroeconomic assessment

Tamim Bayoumi, Douglas Laxton and Paolo Pesenti

No 803, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using a general-equilibrium simulation model featuring nominal rigidities and monopolistic competition in product and labor markets, this paper estimates the macroeconomic benefits and international spillovers of an increase in competition. After calibrating the model to the euro area vs. the rest of the industrial world, the paper draws three conclusions. First, greater competition produces large effects on macroeconomic performance, as measured by standard indicators. In particular, we show that differences in competition can account for over half of the current gap in GDP per capita between the euro area and the US. Second, it may improve macroeconomic management by increasing the responsiveness of wages and prices to market conditions. Third, greater competition can generate positive spillovers to the rest of the world through its impact on the terms of trade.

Keywords: Macroeconomics; Econometric models; Competition - Europe (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-com, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (117)

Downloads: (external link)
http://www.federalreserve.gov/pubs/ifdp/2004/803/default.htm (text/html)
http://www.federalreserve.gov/pubs/ifdp/2004/803/ifdp803.pdf (application/pdf)

Related works:
Working Paper: Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment (2004)
Working Paper: Benefits and spillovers of greater competition in Europe: a macroeconomic assessment (2004)
Working Paper: Benefits and spillovers of greater competition in Europe: a macroeconomic assessment (2004)
Working Paper: Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assesment (2004)
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:fip:fedgif:803

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().