- "Growth in certain euro-zone countries is currently limited by the current account deficit. The remedy they are forced to use is to reduce their external borrowing requirement, and therefore to save and curb growth. But to what extent must growth slow down for the external balance to improve? The answer depends not only on the elasticity of imports to domestic growth, but also on the elasticity of exports and the vigour of foreign demand."
- "We therefore calculate the critical threshold of growth for which a country’s current-account balance does not deteriorate, given its specialisation and growth among the main trading partners (Thirlwall model):
• in Greece, Ireland, Finland, Slovakia and Slovenia, domestic growth may be twice as high or even more in comparison to growth of their main trading partners;
• in the Netherlands, Belgium, Austria and Spain, growth must be proportional;
• in Germany, France, Portugal, but above all in Italy, domestic growth must be markedly lower than that of the main partners to meet the balance of payments-constrained growth rate."
- "Over the past fifteen years, this growth threshold was 6.3% annually for Ireland, 4.8% for Greece, 2.6% for Spain, 2% for Germany, 1.8% for France and 0.9% for Italy."
- "Currently, the growth regime suggests that the external borrowing requirements are increasing further - slightly - only in France and Belgium."
- "By applying this model to our growth forecasts, we conclude that the differentials in current-account balances between EMU countries will tend to shrink by 2011. The euro zone’s external position will improve as a whole, which points to a fundamental appreciation of the euro."
- "We therefore calculate the critical threshold of growth for which a country’s current-account balance does not deteriorate, given its specialisation and growth among the main trading partners (Thirlwall model):
• in Greece, Ireland, Finland, Slovakia and Slovenia, domestic growth may be twice as high or even more in comparison to growth of their main trading partners;
• in the Netherlands, Belgium, Austria and Spain, growth must be proportional;
• in Germany, France, Portugal, but above all in Italy, domestic growth must be markedly lower than that of the main partners to meet the balance of payments-constrained growth rate."
- "Over the past fifteen years, this growth threshold was 6.3% annually for Ireland, 4.8% for Greece, 2.6% for Spain, 2% for Germany, 1.8% for France and 0.9% for Italy."
- "Currently, the growth regime suggests that the external borrowing requirements are increasing further - slightly - only in France and Belgium."
- "By applying this model to our growth forecasts, we conclude that the differentials in current-account balances between EMU countries will tend to shrink by 2011. The euro zone’s external position will improve as a whole, which points to a fundamental appreciation of the euro."
Natixis Flash Economics 383 20100728
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