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The North-South Divide, the Euro and the Worlds

Konstantinos Chisiridis (), Kostas Mouratidis and Theodore Panagiotidis

GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE

Abstract: The European north-south divide has been an issue of a long-standing debate. We employ a Global VAR model for 28 developed and developing countries to examine the interaction between the global trade imbalances and their impact within the euro-area framework. The aim is to assess the propagation mechanisms of real shocks, focusing on the interconnections among the north euro area and the south euro area. We incorporate theory-based long-run over-identifying restrictions and examine the effects of (i) non- export real output shocks, (ii) expansionary shocks and (iii) real exchange rate shocks. An expansionary policy of the north euro area and increased competitiveness in the south euro area could alleviate trade imbalances of the debtor euro area economies. From the south euro area perspective, internal devaluation decreases output but at the same time, it also reduces current account deficits. North euro area origin shocks to domestic output exert a dominant influence in the rest of the Europe and Asia.

Keywords: global trade imbalances; expansionary policy; competitiveness; internal devaluation; current account deficits (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-eec
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http://www.lse.ac.uk/Hellenic-Observatory/Assets/D ... ers/GreeSE-No147.pdf (application/pdf)

Related works:
Working Paper: The north-south divide, the Euro and the world (2020) Downloads
Working Paper: The North-South Divide, the Euro and the World (2020) Downloads
Working Paper: The North-South Divide, the Euro and the World (2018) Downloads
Working Paper: The North-South Divide, the Euro and the World (2018) Downloads
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