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Heterogeneous effects of competitiveness shocks on macroeconomic performance across euro area countries

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  • Karsten Staehr
  • Robert Vermeulen

Abstract

This paper considers how competitiveness impacts macroeconomic performance in 11 euro area countries. VAR models are estimated for the individual countries using quarterly data from 1995Q4 to 2013Q4. Besides unit labour costs as a competitiveness measure, the models include GDP, the current account balance and domestic credit. The empirical analyses show that changes in unit labour costs help explain GDP dynamics in the short and medium term in most countries, whereas they have little explanatory power for the current account balance or domestic credit for most countries. Overall, the effects of the unit labour costs vary substantially across the countries in the euro area. The heterogeneity suggests that policy measures aiming to improve economic growth, correct current account imbalances and ensure financial stability need to take country‐specific features into account.

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  • Karsten Staehr & Robert Vermeulen, 2019. "Heterogeneous effects of competitiveness shocks on macroeconomic performance across euro area countries," The World Economy, Wiley Blackwell, vol. 42(1), pages 68-86, January.
    • Handle: RePEc:bla:worlde:v:42:y:2019:i:1:p:68-86
    DOI: 10.1111/twec.12675
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    Cited by:

    1. Karsten Staehr, 2021. "Export performance and capacity pressures in Central and Eastern Europe," International Economics, CEPII research center, issue 165, pages 204-217.
    2. Radovan Kovačević, 2019. "The Export Performance Of The Euro Area: A Panel Quantile Regression Approach," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 64(222), pages 7-62, July – Se.

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