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on Open MacroEconomics |
| By: | Zsolt Darvas |
| Abstract: | Sectoral shifts, such as shrinkage of low labour productivity and the low-wage construction sector, can lead to apparent increased aggregate average labour productivity and average wages, especially when capital intensity differs across sectors. For 11 main sectors and 13 manufacturing sub-sectors, we quantify the compositional effects on productivity, wages and unit labour costs (ULCs) based and real effective exchange rates (REER), for 24 EU countries. Compositional effects are greatest in Ireland, where the pharmaceutical sector drives the growth of output and productivity, but other sectors have suffered greatly and have not yet recovered. Our new ULC-REER measurements, which are free from compositional effects, correlate well with export performance. Among the countries facing the most severe external adjustment challenges, Lithuania, Portugal and Ireland have been the most successful based on five indicators, and Latvia, Estonia and Greece the least successful. There is evidence of downward wage flexibility in some countries, but wage cuts have corrected just a small fraction of pre-crisis wage rises and came with massive reductions in employment even in the business sector excluding construction and real estate, highlighting the difficulty of adjusting wages downward. |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:730&r=opm |
| By: | Kuikeu, Oscar |
| Abstract: | In cfa franc zone, the exchange rate was devalued, in 1994, in order to deal with the major macroeconomic imbalances that have affected the members during the 1980 decade. Thus, the aim of this paper is to know if this devaluation was relevant, and, in the sense that the devaluation is relevant only if the real exchange rate is overvalued, we will assess the degree of the real exchange rate misalignment in the cfa franc zone. |
| Keywords: | equilibrium real exchange rate, cfa franc zone |
| JEL: | C33 F31 |
| Date: | 2012–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:39614&r=opm |
| By: | Virginie Coudert; Cécile Couharde; Valérie Mignon |
| Abstract: | Although nominal parities have been completely fixed within the euro area since the launch of the single currency, real effective exchange rates have continued to vary under the effect of inflation disparities, exhibiting a strong appreciation in the peripheral countries. In this paper, we assess real exchange rate misalignments for euro area countries by using a Behavioral Equilibrium Exchange Rate (BEER) approach on the period 1980-2010. The results show that the peripheral member countries have been suffering from increasingly overvalued exchange rates since the mid-2000s, as their real appreciation has not stemmed from improving fundamentals in terms of productivity or external position. In addition, currency misalignments have been increased on average for all euro area countries since monetary union, while becoming more persistent. More worryingly, our findings highlight different patterns across members, as misalignments have been larger and more persistent in peripheral countries than in core countries. |
| Keywords: | euro area, real equilibrium exchange rates, misalignments, panel cointegration |
| JEL: | F31 C23 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2012-30&r=opm |