Export stagnation and budget deficits in the peripheral EU nations with EMU membership
2013 (English)In: Journal of Economic Asymmetries, ISSN 1703-4949, Vol. 10, no 2, 94-100 p.Article in journal (Refereed) Published
This paper presents a theoretical model of the economic and financial implications of EMU entry for the peripheral nations of the Euro area, the so-called PIGS nations. The model derived shows that EMU membership initiates huge capital inflows into the PIGS nations, driving up prices and wage costs. The rise in prices reduces international trade competitiveness, reducing net exports, while the rise in wage costs leads to greater government budget outlays, deteriorating the government budget. Without exchange rate adjustments, export stagnation, further exacerbated by the economic downturn in the Euro area as a whole, has been the price paid by the peripheral Euro nations. Examining the data for the recent decade suggests that the arguments against laying the blame for the economic and financial crises in the PIGS nations squarely on bad domestic policy-making and practices need to be taken seriously.
Place, publisher, year, edition, pages
2013. Vol. 10, no 2, 94-100 p.
Budget deficits, Capital flows, Economic integration, Export stagnation
Economics and Business
IdentifiersURN: urn:nbn:se:sh:diva-23363DOI: 10.1016/j.jeca.2013.11.002ScopusID: 2-s2.0-84897748293OAI: oai:DiVA.org:sh-23363DiVA: diva2:714265