Euro area imbalances: How much could an expansion in the North help the South?
Oliver Picek and
No 180-2017, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute
We run simulations of current account rebalancing scenarios in the Euro Area and the European Union based on a closed multi-country input-output model. The spillover effects of domestic demand booms in the Northern European surplus countries are non-negligible, but not large. While they cannot on their own create a meaningful upswing in the former Southern European deficit countries, they could be an important element thereof. In particular, a Northern expansion can create the necessary policy space for a domestic demand-driven expansion in the European South by relaxing the balance of payments constraint. Then, a coordinated asymmetric expansion in the Euro Area could alleviate the unemployment crisis in the European South.
Keywords: Current Account Imbalances; Current Account Rebalancing; Euro Crisis; Euro Zone; Domestic Demand Expansion; European Union (search for similar items in EconPapers)
JEL-codes: F15 F32 F45 (search for similar items in EconPapers)
Pages: 28 pages
New Economics Papers: this item is included in nep-acc and nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:180-2017
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