Dealing with the Consequences of Exchange Rate Misalignments for Macroeconomic Adjustments in the EMU

31 Pages Posted: 10 Oct 2018

See all articles by Vincent Duwicquet

Vincent Duwicquet

University of Lille I

Jacques Mazier

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Jamel Saadaoui

University of Strasbourg

Date Written: November 2018

Abstract

The euro crisis sheds light on the nature of alternative adjustment mechanisms in the EMU. This article examines the exchange rate misalignments within the euro zone, using a FEER approach. To explore the consequences of these misalignments, we use an open economy SFC model with endogenous interest rates and Eurobonds. Facing a competitiveness loss in southern countries due to misalignments, three sets of alternative economic policy are investigated: a policy‐mix based on tax rebates to improve competitiveness; an increase in intra‐European financing by banks of northern countries; and an issuance of Eurobonds to pool European sovereign debt.

Suggested Citation

Duwicquet, Vincent and Mazier, Jacques and Saadaoui, Jamel, Dealing with the Consequences of Exchange Rate Misalignments for Macroeconomic Adjustments in the EMU (November 2018). Metroeconomica, Vol. 69, Issue 4, pp. 737-767, 2018. Available at SSRN: https://ssrn.com/abstract=3264292 or http://dx.doi.org/10.1111/meca.12211

Vincent Duwicquet (Contact Author)

University of Lille I ( email )

Cité Scientifique 59655 Villeneuve d'Ascq Cedex
Villeneuve d'Ascq, 59655
France

Jacques Mazier

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

UMR7115
Université Paris-Nord
Paris XIII
France

Jamel Saadaoui

University of Strasbourg ( email )

61 Avenue de la Forêt Noire
Strasbourg, Alsace 67000
France

HOME PAGE: http://www.jamelsaadaoui.com/

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