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Eurozone Macroeconomic Framework: Reducing Internal and External Imbalances

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  • Wood, richard

Abstract

This article reviews internal and external balance policy issues in the Eurozone. The Swan diagram is used as a framework for assessing the policy actions needed to simultaneously restore both internal and external balance in selected Eurozone countries. A critical assessment is provided of using unit labour costs as an indicator of external competitiveness. It is argued that current macroeconomic policy settings are contributing to declining incomes, rising unemployment, high public debt and deflation, while failing to correct intra-Eurozone balance of payments disequilibria. A new macroeconomic policy plan is outlined for restoring economic growth and reducing external imbalances without raising public debt.

Suggested Citation

  • Wood, richard, 2014. "Eurozone Macroeconomic Framework: Reducing Internal and External Imbalances," MPRA Paper 53569, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53569
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    File URL: https://mpra.ub.uni-muenchen.de/53569/1/MPRA_paper_53569.pdf
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    References listed on IDEAS

    as
    1. Phillip Edmund Metaxas & Ernst Juerg Weber, 2016. "An Australian Contribution to International Trade Theory: The Dependent Economy Model," The Economic Record, The Economic Society of Australia, vol. 92(298), pages 464-497, September.
    2. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2007. "How Wages Change: Micro Evidence from the International Wage Flexibility Project," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 195-214, Spring.
    3. International Monetary Fund, 2013. "Euro Area Policies: 2013 Article IV Consultation," IMF Staff Country Reports 2013/231, International Monetary Fund.
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    Cited by:

    1. Pucar Emilija Beker & Glavaški Olgica, 2019. "Macroeconomic Еxternal (Im)Balances within the Eurozone: Core Vs Periphery," Economic Themes, Sciendo, vol. 57(3), pages 257-272, September.
    2. Aidan Regan, 2014. "What Explains Ireland’s Fragile Recovery from the Crisis? The Politics of Comparative Institutional Advantage," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(02), pages 26-31, April.

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    More about this item

    Keywords

    Macroeconomic policy; internal and external balance; competitiveness; public debt; deflation.;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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