New paper on macroeconomic divergence in the Eurozone by Claudius Gräbner
The paper Is the Eurozone disintegrating? Macroeconomic divergence, structural polarisation, trade and fragility has now been published in the Cambridge Journal of Economics. The paper analyses macroeconomic developments in the Eurozone since its inception in 1999 and documents a process of divergence and polarisation that produces a ‘core-periphery’ structure among the countries that have joined the Eurozone during its first two years. It is argued that competition among countries is a relevant driver of the ‘structural polarization’ and the resulting emergence of export-driven growth in core countries and debt-driven growth in the Eurozone periphery. Since the deeper reasons can be traced back to differences in technological capabilities and firm performance, pushing for convergence within Europe requires the implementation of industrial policies aiming at a technological catch-up process.