Comparing post-crisis dynamics across Euro Area countries with the Global Multi-country model

Following the global financial crisis, the Euro Area (EA) has experienced a persistent slump and notable tradebalance adjustments, but with pronounced differences across EA Member States. We estimate a multi-countrystructural macroeconomic model to assess and compare the main drivers of GDP growth and trade balanceadjustment across Germany, France, Italy, and Spain. We find that the pronounced post-crisis slump in Italyand Spain was mainly driven by positive saving shocks (‘deleveraging’) and by an increase in investment andintra-euro risk premia. Fiscal austerity in Spain and the productivity slowdown in Italy have been additionalsizable contributors to the economic downturn. The results further suggest that euro depreciation, heightenedintra-euro risk premia and subdued investment had a sizable impact on the trade balance reversals in Italy andSpain, which has been offset in France by a strong increase in imports and lower exports.

ALBONICO Alice;  CALÈS Ludovic;  CARDANI Roberta;  CROITOROV Olga;  FERRONI Filippo;  GIOVANNINI Massimo;  HOHBERGER Stefan;  PATARACCHIA Beatrice;  PERICOLI Filippo;  RACIBORSKI Rafal;  RATTO Marco;  ROEGER Werner;  VOGEL Lukas; 

2019-09-09

ELSEVIER SCIENCE BV

JRC112059

0264-9993 (online),   

https://www.sciencedirect.com/science/article/pii/S0264999318307958?via%3Dihub,    https://publications.jrc.ec.europa.eu/repository/handle/JRC112059,   

10.1016/j.econmod.2019.04.016 (online),