The Dutch disease of the Euro Area peripheral member states

• Autor(a) principal: Alcobia, João
• Data de Publicação: 2023
• Outros Autores: Cabral, Ricardo
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.5/26932
• topic: Financial Dutch disease; peripheral member states of the Euro Area; non-price competitiveness; Euro Area architecture

This paper analyzes explanations identified in the literature for the subpar economic performance of the so-called peripheral member states of the Euro Area since the mid-1990s. It argues that a key factor was a Dutch disease-like transmission mechanism, as the adoption of the euro led to a capital inflow shock. This resulted in a structural shift in the productive structure of the peripheral economies away from technologically advanced manufactured goods, which are characterized by higher productivity growth. As a consequence, the peripheral member states specialized in non-tradable sectors, and in low-technology and labor-intensive tradable goods sectors, which largely explains the peripherals’ low economic growth, low productivity growth, and growing macroeconomic imbalances.