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Growth Patterns and Trade Imbalances in the EMU. A Global Value Chain Analysis

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  • Stefan Ederer
  • Peter Reschenhofer

Abstract

This paper assesses whether or to what extent the macroeconomic imbalances, which emerged in the "North" and "South" of the European Monetary Union before the financial and economic crisis of 2008-09, are symmetric. First, we show that the imbalances stemmed from different growth patterns and quantify the contributions of foreign and domestic demand to GDP growth in the EMU countries. Second, we calculate bilateral exports and imports between all EU countries, applying the concept of "trade in value added", and discuss their role in the emergence of trade surpluses and deficits. Third, we quantify to what extent an increase in domestic demand in the North and a decrease in the South would support the elimination of these imbalances. Finally, we calculate a hypothetical scenario in which final demand expands to such extent that all intra-EMU trade is balanced. We thereby evaluate whether or to what extent the macroeconomic imbalances can be eliminated by demand adjustments in the EMU countries.

Suggested Citation

  • Stefan Ederer & Peter Reschenhofer, 2016. "Growth Patterns and Trade Imbalances in the EMU. A Global Value Chain Analysis," WIFO Working Papers 509, WIFO.
    • Handle: RePEc:wfo:wpaper:y:2016:i:509
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    File URL: https://www.wifo.ac.at/wwa/pubid/58642
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    References listed on IDEAS

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    1. Marcel P. Timmer & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2013. "Fragmentation, incomes and jobs: an analysis of European competitiveness [Who captures value in global supply chains?]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 28(76), pages 613-661.
    2. Marcel Timmer & Abdul A. Erumban & Reitze Gouma & Bart Los & Umed Temurshoev & Gaaitzen J. de Vries & I–aki Arto & Valeria Andreoni AurŽlien Genty & Frederik Neuwahl & JosŽ M. Rueda?Cantuche & Joseph , 2012. "The World Input-Output Database (WIOD): Contents, Sources and Methods," IIDE Discussion Papers 20120401, Institue for International and Development Economics.
    3. Stefan Ederer & Peter Reschenhofer, 2013. "Macroeconomic Imbalances in the EU. WWWforEurope Working Paper No. 42," WIFO Studies, WIFO, number 47017.
    4. Baldwin, Richard, 2012. "Trade and industrialisation after globalisation?s 2nd unbundling: How building and joining a supply chain are different and why," CEPR Discussion Papers 8768, C.E.P.R. Discussion Papers.
    5. Robert Stehrer, 2012. "Trade in Value Added and the Valued Added in Trade," wiiw Working Papers 81, The Vienna Institute for International Economic Studies, wiiw.
    6. Richard Baldwin & Javier Lopez-Gonzalez, 2015. "Supply-chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses," The World Economy, Wiley Blackwell, vol. 38(11), pages 1682-1721, November.
    7. Foster-McGregor, Neil & Stehrer, Robert, 2013. "Value added content of trade: A comprehensive approach," Economics Letters, Elsevier, vol. 120(2), pages 354-357.
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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. Ines KERSAN-SKABIĆ, 2017. "Assessment of EU member states' positions in Global Value Chains," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 8, pages 5-24, December.
    3. 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.
    4. Stefan Ederer & Josef Baumgartner & Jürgen Bierbaumer-Polly & Serguei Kaniovski & Silvia Rocha-Akis & Gerhard Streicher, 2016. "Österreich 2025 – Privater Konsum und öffentliche Investitionen in Österreich," WIFO Studies, WIFO, number 59037, February.

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    Keywords

    European Monetary Union; macroeconomic imbalances; global value chains; input-output analysis;
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