The north-south divide, the Euro and the world

Chisiridis, Konstantinos, Mouratidis, Kostas and Panagiotidis, Theodore (2020) The north-south divide, the Euro and the world. GreeSE papers (147). London School of Economics and Political Science, London, UK.

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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) nonexport 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

Item Type:	Monograph (Discussion Paper)
Official URL:	http://www.lse.ac.uk/Hellenic-Observatory/Publicat...
Additional Information:	© 2020 The Authors
Divisions:	Hellenic Observatory
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions J Political Science > JN Political institutions (Europe)
Date Deposited:	19 May 2020 08:21
Last Modified:	14 Sep 2024 04:09
URI:	http://eprints.lse.ac.uk/id/eprint/104470

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