Empirica – Journal of European Economics

Sponsored by the Austrian Economic Association and the Austrian Institute of Economic Research

Empirica publishes empirical and theoretical work on all economic aspects of European Integration. The topics may range from all challenges concerning the deepening of the European Union (Single Market, Lisbon Agenda, EMU) to enlargement and the external relations of the EU (globalisation).

Journal homepage

Search for articlesAdvanced search

Details

Giovanni Covi
Trade imbalances within the Euro Area: two regions, two demand regimes
Empirica, 2021, 48(1), pp.181-221, http://www.springer.com/10663
Greater trade integration, convergence in economic performance and a high level of employment among member states: this was why the euro area was created. In this respect, the paper analyses the sources of trade imbalances within the euro area, focusing on the direct trade relationship – intra-euro-area trade – between surplus and deficit countries. The econometric evidence based on a VAR/SVAR methodology suggests that asymmetric wage shocks determine asymmetric gains from intra-euro-area trade, resulting from opposing growth strategies. In addition, the empirical evidence shows that the euro area is divided into two economic regions representing different demand regimes: a northern region, which is profit-led and a southern region, which is wage-led. The paper suggests that wage coordination is an essential macroeconomic tool but is insufficient to achieve trade and economic integration given the current state of divergence. Thus, a trade-based transfer mechanism is proposed to restore convergence in the euro area.
Research group:Macroeconomics and Public Finance
Language:English

Managing Editor

Univ.-Prof. MMag. Dr. Harald Oberhofer

Function: Senior Economist, Editor-in-Chief Empirica
Research groups: Industrial, Innovation and International Economics