A1 - Benjamin Carton
A1 - Karine Hervé
TI - Is There any Rebalancing in the Euro Area?
IS - 2013-32
T3 - Working Papers
KW - Exchange Rates
KW - Current Account Adjustment
KW - Euro Area
N2 - We assess the evolution of real exchange rate misalignments within the euro area from a Fundamental Equilibrium Exchange Rate (FEER) approach. We test the robustness of the results by comparing three different estimations of the output gap. Whatever the output gap assumption, Southern countries were massively overvalued before the euro area crisis. However, the magnitude of the adjustment since is sensitive to the output gap. In particular, Greece has not registered any improvement considering an output gap that captures the financial cycle (10-15 years) instead of the business cycle (5 years). Spain and Portugal have significantly reduced their misalignment but against France and Italy instead of Germany. As a consequence, imbalances in the euro area have not reduced.
ER -