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Eurozone Imbalances: Measuring the Contribution of Expenditure Switching and Expenditure Volumes 1990-2013

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  • Enno Schröder

    (Institute for New Economic Thinking, 300 Park Avenue South, New York, NY 10010; Department of Economics, New School for Social Research)

Abstract

This paper introduces a decomposition of the trade ratio. The dynamics of the trade ratio are composed of contributions from expenditure switching, from the terms of trade, and from relative expenditure (i.e. the ratio of foreign to domestic expenditure). Country-specific, dynamically tradeweighted indicators of foreign expenditure are constructed for use in the application of the decomposition to 11 euro area countries in 1990-2013. Over 1999-2007, Germany and Spain shared the same pattern of expenditure switching; the slack in German expenditure translated into trade surpluses and the boom in Spain into deficits; expenditure was being switched away from domestic output towards foreign output in every country except Austria, Greece, and Ireland; and the magnitude of this unfavorable switching was largest in Finland, France, and Italy.

Suggested Citation

  • Enno Schröder, 2015. "Eurozone Imbalances: Measuring the Contribution of Expenditure Switching and Expenditure Volumes 1990-2013," Working Papers 1508, New School for Social Research, Department of Economics, revised Sep 2015.
    • Handle: RePEc:new:wpaper:1508
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    Cited by:

    1. Oliver Picek & Enno Schröder, 2017. "Euro area imbalances: How much could an expansion in the North help the South?," IMK Working Paper 180-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Oliver Picek & Enno Schröder, 2018. "Spillover effects of Germany's final demand on Southern Europe," The World Economy, Wiley Blackwell, vol. 41(8), pages 2216-2242, August.

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    More about this item

    Keywords

    External adjustment; expenditure switching; competitiveness; decomposition; Euro area;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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