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Intra-European imbalances, adjustment, and growth in the eurozone

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  • Paolo Guerrieri
  • Piero Esposito
Abstract
This paper considers the increase in the Euro intra-area imbalances since the late 1990s and their role in the current European debt crisis. By focusing on the case study of Italy and Germany, we argue that both macroeconomic (the functioning of the euro area) and microeconomic (internationalization of production) factors contributed to the creation of such imbalances. When sovereign risk and currency risk emerged in the periphery, coupled with austerity as a response to these risks, both factors made the euro crisis worse. The present zero-sum-game approach is very risky for the stability of the euro area. Policy coordination of some kind is needed. This requires agreeing on well-identified economic policy priorities, taking full account of the different positions of the members in terms of growth, external imbalances, and competitiveness. New policy priorities are thus required in the euro zone that put more emphasis on cooperative (positive-sum) games in convergence and competitiveness. Copyright 2013, Oxford University Press.

Suggested Citation

  • Paolo Guerrieri & Piero Esposito, 2013. "Intra-European imbalances, adjustment, and growth in the eurozone," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 28(3), pages 532-550, AUTUMN.
    • Handle: RePEc:oup:oxford:v:28:y:2013:i:3:p:532-550
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    File URL: http://hdl.handle.net/10.1093/oxrep/grs026
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    Cited by:

    1. Ronny Mazzocchi & Roberto Tamborini, 2019. "Current Account Imbalances and the Euro Area: Alternative Views," EconPol Working Paper 27, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Walter Paternesi Meloni, 2018. "Italy’s Price Competitiveness: An Empirical Assessment Through Export Elasticities," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(3), pages 421-462, November.
    3. Esposito, Piero, 2017. "Trade creation, trade diversion and imbalances in the EMU," Economic Modelling, Elsevier, vol. 60(C), pages 462-472.
    4. Juan Carlos Cuestas & Javier Ordóñez & Karsten Staehr, 2019. "Unit labour costs and the dynamics of output and unemployment in the southern European crisis countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(3), pages 597-616, August.
    5. Hope, David, 2016. "Estimating the effect of the EMU on current account balances: A synthetic control approach," European Journal of Political Economy, Elsevier, vol. 44(C), pages 20-40.
    6. Pami Dua & Divya Tuteja, 2017. "Impact Of Eurozone Sovereign Debt Crisis On China And India," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(05), pages 1137-1164, December.
    7. Esposito, Piero & Messori, Marcello, 2019. "Competitive or recession gains? On the recent macroeconomic rebalances in the EMU," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 147-167.

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