How Competitiveness Shocks Affect Macroeconomic Performance Across Euro Area Countries

35 Pages Posted: 25 Aug 2016

See all articles by Karsten Staehr

Karsten Staehr

Tallinn University of Technology (TUT) - Department of Finance and Economics; Bank of Estonia

Robert Vermeulen

De Nederlandsche Bank

Multiple version iconThere are 2 versions of this paper

Date Written: August 24, 2016

Abstract

This paper considers the short-term effects of competitiveness shocks on macroeconomic performance in the euro area. Vector autoregressive models are estimated on quarterly data from 1995 to 2013 for individual countries and the whole euro area. The results show that competitiveness shocks help to explain subsequent GDP developments in most countries but have little explanatory power for the current account balance and domestic credit. These results apply for all of the competitiveness measures considered, but a non-traditional competitiveness measure accounting for quality differences fares better in some cases. The effects of the competitiveness measures vary substantially across the countries in the euro area, which likely reflects their different economic structures and institutions. This heterogeneity suggests that policy measures seeking to improve competitiveness may have very different effects on economic performance and financial stability in different countries.

Keywords: Competitiveness, macroeconomic variables, transmission, euro area

JEL Classification: E32, E61, F32

Suggested Citation

Staehr, Karsten and Vermeulen, Robert, How Competitiveness Shocks Affect Macroeconomic Performance Across Euro Area Countries (August 24, 2016). ECB Working Paper No. 1940, Available at SSRN: https://ssrn.com/abstract=2828602

Karsten Staehr

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3-486
Tallinn, 12618
Estonia

HOME PAGE: http://www.ttu.ee/karsten-staehr

Bank of Estonia ( email )

Estonia Building 13
Tallinn, 15095
Estonia

Robert Vermeulen (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

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