Current Account Imbalances and Structural Adjustment in the Euro Area: How to Rebalance Competitiveness
43 Pages Posted: 7 May 2009
Date Written: May 2009
Low international competitiveness of a set of euro area countries, which have become evident by large current account deficits and rising risk premiums on government bonds, is one of the most challenging economic policy issues for Europe. We analyse the role of private restructuring and public structural reforms for the urgently needed readjustment of intra-euro area imbalances. A panel regression reveals a significant impact of private restructuring and public structural reforms on intra-euro area competitiveness. This implies that private restructuring and public reforms are rather than public transfers the best way to preserve long-term economic stability in Europe.
Keywords: structural reforms, international competitiveness, current account imbalances, European Monetary Union, euro area, dynamic panel estimation, interaction term
JEL Classification: E24, F15, F16, F32, F33
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