[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/cii/cepipb/2018-21.html
   My bibliography  Save this paper

Some Unpleasant Euro Arithmetic

Author

Listed:
  • Guillaume Gaulier
  • Vincent Vicard
Abstract
Current estimates of misalignments in real effective exchange rates show that euro area imbalances are still large: Germany exhibits a 20 percentage point undervaluation compared to the rest of the euro area (EA). Within a monetary union, rebalancing requires price adjustments through differentials in inflation rates. The rebalancing process therefore involves a 2 percentage point higher inflation in Germany than in the rest of the EA over a decade, or a 1 pp over two decades. It also requires above 2% inflation in surplus countries to meet the 2% ECB inflation target. At the current pace, rebalancing is a 20 year process and requires sustained very low inflation rates in the rest of the euro area.

Suggested Citation

  • Guillaume Gaulier & Vincent Vicard, 2018. "Some Unpleasant Euro Arithmetic," CEPII Policy Brief 2018-21, CEPII research center.
    • Handle: RePEc:cii:cepipb:2018-21
    as

    Download full text from publisher

    File URL: http://www.cepii.fr/PDF_PUB/pb/2018/pb2018-21.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cécile Couharde & Anne-Laure Delatte & Carl Grekou & Valérie Mignon & Florian Morvillier, 2017. "Sur- et sous-évaluations de change en zone euro?: vers une correction soutenable des déséquilibres??," La Lettre du CEPII, CEPII research center, issue 375.
    2. Olivier Blanchard, 2016. "The Phillips Curve: Back to the '60s?," American Economic Review, American Economic Association, vol. 106(5), pages 31-34, May.
    3. Mar Delgado-Téllez & Enrique Moral-Benito & Francesca Viani, 2020. "An anatomy of the Spanish current account adjustment: the role of permanent and transitory factors," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(4), pages 501-529, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Charlotte Emlinger & Sébastien Jean & Vincent Vicard, 2019. "L’étonnante atonie des exportations françaises : retour sur la compétitivité et ses déterminants," CEPII Policy Brief 2019-24, CEPII research center.
    2. Sergio Cesaratto & Gennaro Zezza, 2018. "What went wrong with Italy, and what the country should now fight for in Europe," FMM Working Paper 37-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joaquín Bernal-Ramírez & Jair Ojeda-Joya & Camila Agudelo-Rivera & Felipe Clavijo-Ramírez & Carolina Durana-Ángel & Clark Granger-Castaño & Daniel Osorio-Rodríguez & Daniel Parra-Amado & José Pulido &, 2022. "Impacto macroeconómico del cambio climático en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, issue 102, pages 1-62, July.
    2. Kabundi, Alain & Poon, Aubrey & Wu, Ping, 2023. "A time-varying Phillips curve with global factors: Are global factors important?," Economic Modelling, Elsevier, vol. 126(C).
    3. Siena Daniele, & Zago Riccardo., 2021. "Job Polarization and the Flattening of the Price Phillips Curve," Working papers 819, Banque de France.
    4. Marco Del Negro & Michele Lenza & Giorgio E. Primiceri & Andrea Tambalotti, 2020. "What's Up with the Phillips Curve?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(1 (Spring), pages 301-373.
    5. Nakov, Anton & Petit, Borja & Costain, James, 2018. "Monetary policy implications of state-dependent prices and wages," CEPR Discussion Papers 13398, C.E.P.R. Discussion Papers.
    6. Stefański, Maciej, 2022. "Macroeconomic effects and transmission channels of quantitative easing," Economic Modelling, Elsevier, vol. 114(C).
    7. Karl Whelan, 2021. "Central banks and inflation: where do we stand and how did we get here?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 18(3), pages 310–330-3, December.
    8. Marente Vlekke & Martin Mellens & Siem Jan Koopmans, 2020. "An assessment of the Phillips curve over time: evidence for the United States and the euro area," CPB Discussion Paper 416, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Yunjong Eo & Denny Lie, 2020. "The Role of Inflation Target Adjustment in Stabilization Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(8), pages 2007-2052, December.
    10. Andrea Ajello & Isabel Cairó & Vasco Curdia & Thomas A. Lubik & Albert Queraltó, 2020. "Monetary Policy Tradeoffs and the Federal Reserve's Dual Mandate," Finance and Economics Discussion Series 2020-066, Board of Governors of the Federal Reserve System (U.S.).
    11. Francesca Rondina, 2018. "Estimating Unobservable Inflation Expectations in the New Keynesian Phillips Curve," Econometrics, MDPI, vol. 6(1), pages 1-20, February.
    12. Hadrien Camatte & Guillaume Daudin & Violaine Faubert & Antoine Lalliard & Christine Rifflart, 2021. "Global value chains and the transmission of exchange rate shocks to consumer prices," Working Papers hal-03374355, HAL.
    13. Jordi Galí & Luca Gambetti, 2019. "Has the U.S. Wage Phillips Curve Flattened? A Semi-Structural Exploration," Working Papers Central Bank of Chile 846, Central Bank of Chile.
    14. Kohlscheen, Emanuel & Moessner, Richhild, 2022. "Globalisation and the slope of the Phillips curve," Economics Letters, Elsevier, vol. 216(C).
    15. Jonathon Hazell, 2024. "Comment on "The Dominant Role of Expectations and Broad Based Supply Shocks in Driving Inflation"," NBER Chapters, in: NBER Macroeconomics Annual 2024, volume 39, National Bureau of Economic Research, Inc.
    16. Hideaki Aoyama & Corrado Guilmi & Yoshi Fujiwara & Hiroshi Yoshikawa, 2022. "Dual labor market and the “Phillips curve puzzle”: the Japanese experience," Journal of Evolutionary Economics, Springer, vol. 32(5), pages 1419-1435, November.
    17. Fan, Xuecheng & Xu, Zeshui & Qin, Yong & Škare, Marinko, 2023. "Quantifying the short- and long-run impact of inflation-related price volatility on knowledge asset investment," Journal of Business Research, Elsevier, vol. 165(C).
    18. Döpke, Jörg & Fritsche, Ulrich & Müller, Karsten, 2019. "Has macroeconomic forecasting changed after the Great Recession? Panel-based evidence on forecast accuracy and forecaster behavior from Germany," Journal of Macroeconomics, Elsevier, vol. 62(C).
    19. Mary C. Daly, 2019. "The Bumpy Road to 2 Percent: Managing Inflation in the Current Economy," Speech 193, Federal Reserve Bank of San Francisco.
    20. James Hebden & J. David López-Salido, 2018. "From Taylor's Rule to Bernanke's Temporary Price Level Targeting," Finance and Economics Discussion Series 2018-051, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    Current account imbalances; Euro area; Exchange rates misalignments;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cii:cepipb:2018-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cepiifr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.