6533b82dfe1ef96bd1291587
RESEARCH PRODUCT
The effects of competitiveness on trade balance: The case of Southern Europe
Burcu BerkeVicente EsteveOscar Bajo-rubiosubject
Economic integrationDevaluationBalance of tradeSocial Sciencestrade balanceRelative priceHExchange rate0502 economics and businessEconomicsddc:330media_common.cataloged_instance050207 economicsEuropean unionTrade barrierHB71-74050205 econometrics media_commonF31real exchange ratecompetitiveness05 social sciencesInternational economicsEconomics as a sciencePrice indexF45General Economics Econometrics and FinanceF41description
AbstractAccording to conventional wisdom, “peripheral” Southern European members of the euro area (Greece, Italy, Portugal and Spain) suffer from a problem of competitiveness. Since their membership of the euro area renders devaluation impossible, adjustment should come through decreasing wages and prices in these countries, which, by improving the trade balance, should lead to a recovery of previous levels of employment and growth. In this paper, the authors estimate trade balance equations for the Southern European countries, both for total trade and for the trade performed with the European Union, taking three alternative measures of the real exchange rate, based on consumption price indices, export prices and unit labour costs, respectively. Their main conclusion is that demand seems to be more relevant than relative prices when explaining the evolution of the trade balance.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2016-11-07 |