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Title: The north-south divide, the euro and the world
Authors: Chisiridis, Konstantinos
Mouratidis, Kostas
Panagiotidis, Theodore
Type: Article
Subjects: FRASCATI::Social sciences::Economics and Business::Economics
FRASCATI::Social sciences::Economics and Business::Econometrics
Keywords: Trade Imbalances
European North–South Divide
Global VAR
International Linkages
Spillover Effects
Generalised Impulse Response Analysis
Issue Date: 2022
Source: Journal of International Money and Finance
Volume: 121
First Page: 102516
Abstract: The European north–south divide has been an issue of a long-standing debate. We employ a Global VAR model for 28 developed and developing countries to examine the interaction between the global trade imbalances and their impact within the euro-area framework. The aim is to assess the propagation mechanisms of real shocks, focusing on the interconnections among the north euro area and the south euro area. We incorporate theory-based long-run over-identifying restrictions and examine the effects of (i) non-export real output shocks, (ii) expansionary shocks and (iii) real exchange rate shocks. An expansionary policy of the north euro area and increased competitiveness in the south euro area could alleviate trade imbalances of the debtor euro area economies. From the south euro area perspective, internal devaluation decreases output but at the same time, it also reduces current account deficits. North euro area origin shocks to domestic output exert a dominant influence in the rest of the Europe and Asia.
ISSN: 0261-5606
Other Identifiers: 10.1016/j.jimonfin.2021.102516
Appears in Collections:Department of Economics

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