Abstract
In this paper, we develop four hypotheses for the origins of European imbalances in the context of the European economic integration process. To test the validity of our hypotheses for Germany and Spain, we implement an Autoregressive Distributed Lag bounds testing approach. According to our results, in the German case, economic and financial integration and non-price competitiveness have played a key role in the evolution of the external balance, whilst for Spain, the external balance is related to catching-up. In addition, there is no evidence of a long-run relationship between public finance and external imbalances. We derive important policy implications. On the one hand, deficit countries should ensure that the capital inflows from abroad are allocated to industries with high-added value. On the other hand, surplus countries require the implementation of an expansive economic policy, to lessen the burden of deficit countries when trying to address external imbalances.
| Original language | English |
|---|---|
| Pages (from-to) | 324-357 |
| Number of pages | 34 |
| Journal | Journal of Economic Integration |
| Volume | 32 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 1 Jun 2017 |
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All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance(all)
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Revisiting the factors behind European external imbalances. / Carrasco, Carlos A.; Hernandez-Del-Valle, Adrian.
In: Journal of Economic Integration, Vol. 32, No. 2, 01.06.2017, p. 324-357.Research output: Contribution to journal › Article
TY - JOUR
T1 - Revisiting the factors behind European external imbalances
AU - Carrasco, Carlos A.
AU - Hernandez-Del-Valle, Adrian
PY - 2017/6/1
Y1 - 2017/6/1
N2 - In this paper, we develop four hypotheses for the origins of European imbalances in the context of the European economic integration process. To test the validity of our hypotheses for Germany and Spain, we implement an Autoregressive Distributed Lag bounds testing approach. According to our results, in the German case, economic and financial integration and non-price competitiveness have played a key role in the evolution of the external balance, whilst for Spain, the external balance is related to catching-up. In addition, there is no evidence of a long-run relationship between public finance and external imbalances. We derive important policy implications. On the one hand, deficit countries should ensure that the capital inflows from abroad are allocated to industries with high-added value. On the other hand, surplus countries require the implementation of an expansive economic policy, to lessen the burden of deficit countries when trying to address external imbalances.
AB - In this paper, we develop four hypotheses for the origins of European imbalances in the context of the European economic integration process. To test the validity of our hypotheses for Germany and Spain, we implement an Autoregressive Distributed Lag bounds testing approach. According to our results, in the German case, economic and financial integration and non-price competitiveness have played a key role in the evolution of the external balance, whilst for Spain, the external balance is related to catching-up. In addition, there is no evidence of a long-run relationship between public finance and external imbalances. We derive important policy implications. On the one hand, deficit countries should ensure that the capital inflows from abroad are allocated to industries with high-added value. On the other hand, surplus countries require the implementation of an expansive economic policy, to lessen the burden of deficit countries when trying to address external imbalances.
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UR - http://www.scopus.com/inward/citedby.url?scp=85020179891&partnerID=8YFLogxK
U2 - 10.11130/jei.2017.32.2.324
DO - 10.11130/jei.2017.32.2.324
M3 - Article
VL - 32
SP - 324
EP - 357
JO - Journal of Economic Integration
JF - Journal of Economic Integration
SN - 1225-651X
IS - 2
ER -