The Determinants of Macroeconomic Imbalances in the Euro Area: The Role of External Performances

Abstract

In this chapter we analyzed the causes of macroeconomic imbalances in the euro area by assessing the external performances of the four main European economies: Germany, Italy, France and Spain. We propose two main explanations for such imbalances: very successful internationalization strategies of the German firms, especially toward Central and Eastern Europe (CEECs), on the one hand, and Emerging Markets, particularly China, on the other; the role of the Euro and Economic monetary unification (EMU). The results from an econometric test of these determinants confirm our assumptions. Germany has benefited mostly from internationalization activities with CEECs and the penetration of Emerging Markets. At the same time it more benefited from the creation and functioning of the EMU.