1 Annamaria Simonazzi, Andrea Ginzburg and Gianluigi Nocella Beyond the short run. Germany and the changing division of labour within the enlarged EU (provisional version) June 2012 Abstract Persistent German current account surpluses translate in equally persistent deficits of countries in the European periphery. According to the "culture of stability", the German surplus is the expression of a "virtuous" savings behaviour to be extended to the periphery: restrictive fiscal policies would both reduce the debt/gdp ratio and restore competitiveness through 'fiscal devaluation' and real wage reduction. This approach suffers from an obvious "fallacy of composition" (since it ignores the contribution that deficit countries have so far provided to German foreign demand) and from the lack of a multi-level, multi-dimensional perspective. We investigate whether a German expansion of domestic demand, desirable though unlikely on political ground, would be suffice to provide a viable response to the long-term sustainability of the euro area. We argue that, to this end, a rebalance in trade flows within the EU is also required. Differences in price competitiveness, it is argued, are part of the explanation of the disequilibria, with a much greater role being played by the composition (and direction) of exports: it is its quality that needs to be improved. We investigate trade flows within the EU to highlight areas of convergence or divergence in the production structures of Southern European countries. This analysis is a crucial premise to devise industrial and commercial policies in support of import substitution, product up-grading and export expansion, and the targeting of a multi-dimensional re-equilibrium required to redress the increasing skeweness of EU trade and to rebalance the internal trade among the regions of the same country. 1. Introduction We often read that at the origin of the euro crisis lies a balance of payments problem: persistent German current account surpluses translate in equally persistent deficits of countries in the European periphery. This (apparent) convergence of interpretation hides an important ambiguity that perhaps helps to explain its fortune. These imbalances are, by definition, evidence of a difference between output and demand that is open to different causal explanations. Though agreeing on the idea that these regional disequilibria straightforwardly reflect a standard balance of payments problem, two different interpretations of these regional disequilibria have been advanced, focusing on relative prices and income effects, respectively. Annamaria Simonazzi: Dipartimento di Economia e diritto, Sapienza Università di Roma Andrea Ginzburg: Università di Modena e Reggio Emilia, Gianluigi Nocella: Dipartimento di Economia e diritto, Sapienza Università di Roma Section 3 draws from the results of a paper by Magdalena Boris and Annamaria Simonazzi, Global imbalances, regionalization of trade and the crisis: Strengths and Vulnerabilities of the EU-15 Trade, June 2010.
2 According to the "culture of stability", the German surplus is the expression of a "virtuous" savings behaviour to be extended to the periphery: restrictive fiscal policies would both reduce the debt/gdp ratio and restore competitiveness through 'fiscal devaluation' and real wage reduction. In this view, the surplus reflects the price competitiveness of the German industry in world markets and the loss of competitiveness of peripheral countries. The narrative about the latter s lack of competitiveness generally goes as follows: the fall in borrowing costs on entry into the euro area led to unsustainable booms in borrowing and domestic demand in these countries, fuelling inflation and raising relative prices within the currency union (Bayoumi et al., 2011). Though the surplus countries benefited from higher exports, the model pursued by the deficit countries is unsustainable and must be reformed. Accordingly, the German position is that deficit countries must adjust. They must address their structural problems. They must reduce domestic demand. They must become more competitive and they must increase their exports Unless productivity growth increases miraculously, it is certainly true that prices and wages will have to fall in many cases. But we must not confuse such a one-time adjustment with full-fledged deflation (Weidmann 2012, p. 5). Rebalancing by meeting in the middle, would entail making surplus countries such as Germany less competitive. But the competitive edge did not come for free. It is the result of often painful adjustments among workers and within firms. Giving part of it up to ease the pressure on deficit countries might make these countries better off in relative terms, but it would make everyone poorer in absolute terms. This approach not only suffers from an obvious "fallacy of composition" - since it ignores the contribution that deficit countries have so far provided to German foreign demand - but it also disregards the fact that the increase in net exports reflects the stagnation of domestic demand due to wage compression and high domestic savings 1. Germany has been able to run an economy with chronically weak demand and vast external surpluses because others have been the polar opposite (Whyte, 2010). In fact, current-account positions reflect the difference between domestic savings and investment (or between aggregate spending and output). Germany has been running a current-account surplus because it has been saving more than it has been investing (or, which amounts to the same thing, because it has been spending less than it earns). Moreover, the argument above confuses productivity with competitiveness (achieved by wage cost restraint). German competitiveness reflects the heroic discipline of the country s workers, not the worldbeating efficiency of its economy. Pay restraint in Germany since the introduction of the euro has been quite exceptional. In real terms, German wages are barely higher now than when the euro was launched in It is deeply misleading, therefore, to look at Germany s external surpluses through the prism of the country s competitiveness. The way in which the savings-investment balance has evolved in recent years suggests that the scale of the trade and current-account surpluses is as much a reflection of the economy s domestic weakness as of its external strength (Whyte, 2010). It follows that it will be very difficult, if not impossible, for peripheral countries to balance their books unless there is also a change in the core countries. Given disinflationary pressures in the core countries, restoring competitiveness through domestic cost compression within the euro area will be not only extremely difficult, but it will further exacerbate adverse debt dynamics by limiting nominal GDP growth over coming years. If adjustment needs to be achieved through internal devaluation, inflation has to be substantially higher in the core countries than in the periphery. Different estimates of relative 1 The latter, in turn, are associated with precautionary reasons or with a continuous decline in the wage share. Labour market reforms, while increasing profits and competitiveness of German firms, might have increased job insecurity and uncertainty among workers, with a consequent increase in precautionary savings, thus compressing consumption (Coricelli et al., 2011).
3 costs adjustments have been put forward. According to Goldman Sachs (2012), to achieve a sustainable external position, Portugal needs a real depreciation of its exchange rate of 35 per cent, Greece one of 30 per cent, Spain one of 20 per cent and Italy one of per cent, while Ireland is now competitive. Such adjustments imply offsetting appreciation in core countries. Just to revert to the relative unit labour cost positions of 2000, German inflation would have to exceed inflation in the periphery by almost 3%-points a year for an entire decade. With average inflation of 2 per cent in the euro zone and, say, zero inflation in currently uncompetitive countries, adjustment would take Portugal and Greece 15 years, Spain 10 years and Italy 5-10 years. Moreover, that would also imply 4 per cent annual inflation in the rest of the euro zone (Wolf 2012). Thus, unless one wants to push the periphery into a Japan-like deflationary stagnation, this can only be achieved at EU-wide inflation rates well above the ECB s inflation target. The policy implications of this analysis are that German wages have to grow in excess of productivity growth and the inflation target has to be revised upward so as to allow the core economies to exceed inflation in the South without pushing the deficit countries into deflation (Stockhammer, 2011, p. 14). While we agree with Whyte s position on the impossibility of replicating the German model in the European peripheral countries and on the cumulative dangers of the simultaneous adoption of austerity measures, we doubt that reflationary measures in Germany will suffice to bring about an increase in exports and income in the peripheral countries large enough to redress the disequilibria and start a sustainable recovery. If we want to extend our perspective beyond the short run, two questions should beforehand be briefly addressed. What lies at the origin of the euro crisis is a standard balance of payments crisis -calling for equally standard measures of intervention - or is the cognitive laziness of observers that triggers déjà vu patterns of interpretation and intervention? We shall contend that the euro crisis shows some evidence of the effects of a balance of payments crisis but largely stems from different causes. Second question: Is the lack of price competitiveness of the peripheral countries vis-à-vis Germany the real problem of the euro crisis? in this case, a change in price competitiveness, brought about by a change in unit labour costs, would be enough to achieve the adjustment of the external disequilibria within the euro zone. In the next paragraph we shall dedicate some brief remarks to these two questions, that both on conceptual and empirical grounds seem far from obvious. 2. Current account imbalances in a monetary union: a multi-level and multi-dimensional perspective The experience of the EMU during the global crisis did not confirm the expectations of those 2 who in the late '80s had foreseen, with the formation of a European Central Bank and the integration of European banking, the creation of a "truly European network payments which will make the recycling of balances much easier and much more casual among European countries " so that " intra- European balance of payments could thus become just a statistical curiosity." If this prediction may appear too hasty today, so does the position of those who tend to assimilate the present euro crisis to a standard balance of payments crisis, due to an excess supply of credit in the countries of the European periphery, resulting in real appreciation and current account deficits. Still in 2008, the European Commission argued that the monetary union was contributing to a convergence of per-capita income "via financial market integration and the elimination of the exchange risk premium" and the smooth financing of the current account deficits caused by higher 2 Cf. Giovannini and De Cecco (1989) summarizing Cohen (1989), p. 11.
4 growth. In 2010, after the outbreak of the global crisis, Giavazzi and Spaventa 3 argue that, at a closer look, one could see a fundamental flaw in the quality of the convergence, that is, in the periphery s imbalances: the expectation of a faster output growth driven by rising productivity, that had prompted the capital flows, was destined to be disappointed by the sluggish "behaviour of labour productivity and especially [by] the declining role of Total Factor Productivity in three out of four countries". This was "a signal of lower future growth and therefore not quite compatible with the persistence of foreign capital flows" 4. The neo-mercantilist conclusion of the two authors is that, in order to give rise to sustainable long run capital flows, credit should be channelled towards the production of exportable goods 5. In their view, the imbalances accumulated in the periphery result from the destination of external financing to final uses, variously defined as "domestic demand", or "consumption" or, most frequently and importantly, "non-traded goods" 6. (One may wonder whether in the real world it is possible to find an inputoutput matrix where the traded goods do not use, as inputs, non-traded goods, or where the production of exports does not require productive investment and consumption.) It is not difficult to see in this analysis, which leads to propose, together with the 'internal devaluation', the realignment to 'fundamentals', some form of conditionality in the granting of credit based on abstract general principles. It is the theoretical approach traditionally followed by the IMF: a supply side model based on the hypotheses of full employment, disembodied technical progress measured by a questionable indicator (TFP), and no role for aggregate demand in the long run. The central role in the development process is attributed to price competitiveness. Innovation is identified with productivity growth (which may be explained by R & D, a non-traded 7 good), totally de-contextualised, that is, taken as independent of the level and type of product. We are facing here what could be termed an 'atomistic ontology', that leads to focus on the behaviour of each single country, losing sight of the systemic dimensions of the crisis. From this approach derives also a one-dimensional concept of innovation. A more useful conceptual framework to understand the crisis is the multi-level perspective (MLP), originally advanced to study social systems' transitions to sustainability with respect to substantive environmental problems such as climate change, biodiversity and resource depletion (see Rip and Kemp, 1998, Geels and Schot 2007, Geels 2010, Geels 2011). The traditional emphasis placed by standard balance of payments analysis on price competitiveness, with its mono-dimensional feature, seems incompatible with the multi-dimensional complexity of changes considered by the MLP. From this perspective, at least three aspects qualify the euro crisis as different from a standard balance of payments crisis: a) the presence of global uncertainty, stemming from the unresolved crisis; b) the absence of international reserves as binding constraint on European peripheral countries; c) the loss of credibility due to a faulty construction of European institutions. From this point of view, it is not crucial whether this loss derives from the falling value 8 of public debt held by banks, from the difficulty of selling State bonds, or from the sudden stops 3 Cf. Giavazzi and Spaventa (2010). 4 It is interesting to note that the country considered an exception to this pattern is Greece that "displays a performance more in keeping with what a conventional convergence model would lead us to expect, with a rising contribution of TFP and a declining relevance of the use of factors ". 5 This proposal seems to ignore the many experiences of financial crises in which the fall of the prices of commodities - or of industrial products turned into commodities - played an important role, as in the 1997 Asian crisis. 6 We may recall that already Eichengreen (1990, p. 176) adopting a Heckscher-Ohlin scheme where only final goods are assumed, had observed that the presence of non-traded goods reduces the benefits of economic integration. 7 As Felipe and Kumar (2011), p. 10, observe, peripheral countries do not compete directly with Germany in many products that they export and hence comparing their aggregate unit labour costs and drawing conclusions [from them] is probably misleading. We shall come back below to this issue. 8 Cf. Merler and Pisani-Ferry (2012).
5 of intra-european bank transactions with deficit countries. These events are obviously intertwined, with mutual cumulative effects. Any intervention that does not address, at the proper level, the institutional failure that nurtures this credibility loss is destined to prolong rather than resolve the crisis. The same atomistic ontology inspired the foundation of EMU. Assuming that all countries participating in the monetary union differed only for their preferences about inflation, it was deemed possible, given self-regulating markets, for the European periphery to import disinflation from the more virtuous countries at no social costs. The belief in the existence of a vertical Phillips curve provided an academic justification for the (politically originated) idea that a viable monetary union could be built on the weak foundations of a (partial) centralization of the single currency, with a very limited degree of fiscal centralization. As Eichengreen wrote in , instead of transferring control of national budgetary policies to the European Community, which would involve the whole completion of the process of political integration, the Delors Report of 1989 that anticipates the provisions of the Treaty of Maastricht in 1992, "proposed rules that would firstly impose effective upper limits on budget deficits of individual member countries of the Community.. [and] secondly, exclude direct access to central bank credit and other forms of monetary financing ". As noted by Pivetti, in a paper that builds on Italy's experience with the 'new EMS' before 1992, "without prior constitution of a unified polity and a common balance of payments, there is no monetary regime, established among the potential participants in EMU, that 10 could be regarded as irrevocable. Pivetti warns that "monetary policy integration, unaccompanied by a joint authority over a joint budgetary powers and a joint balance of payments, would hamper rather than enhance the cohesion of the union, due to the differential real impact of a single monetary policy on the individual economies " (a differential impact that the assumed neutrality of money of the monetarist approach excludes a priori). Thus, an interruption of the smooth economic integration of goods and capitals (with sudden stops in interstate interbank lending for lack of confidence and fears of default), can occur even without the binding constraint of the loss of international reserves. This is what occurred recently within the United States, usually considered an optimal currency area. Unlike the Eurozone, however, the US Government has been able to react with (relatively) vigorous discretionary policies. We can conclude that, while at first glance the effects of the euro crisis may resemble those that we find in the models of the balance of payments crisis of the first and third generation (based respectively on excessive budget deficits and on excessive private debt, though, in our case without immediate exchange risk), the causes must be traced mainly to a faulty construction of European institutions, supported by an inadequate economic theory. Sooner or later, this institutional failure would have inevitably attracted speculative attacks, with one-way riskless bets. Compounded by domino effects, the occurrence of crises described by second-generation models (based on self-fulfilling prophecies, in which the so-called 'fundamentals' may have no 11 role ) become much more likely. Without measures of institutional reform in the direction suggested by the Mac Dougall Report (1997), these crises cannot be avoided. This is the opinion that prevailed among European economists until the late 70s, before the monetarist counterrevolution: only with the full centralization of monetary and fiscal functions, transfer of funds required by intra-union surplus and deficits would take place in the same way as between different areas within the same country. 9 Cf. Eichengreen (1993) quoted in Pivetti (1998), p But see also the warnings of Minford (1992), Walters (1992), Cohen (1993) and Simonazzi and Vianello (1998). 11 As Keynes (1931) wrote in 1931, there is a degree of deflation that no bank can sustain, which means that in those situations it would be impossible to distinguish a liquidity crisis from a solvency crisis.
6 Given the differences in the levels of development of the EU countries, the fiscal policy should not have been assigned a merely redistributive and compensative function, as suggested by the literature on optimal currency area, but the more fundamental role of actively promoting - through investments - the removal of development bottlenecks and the renewal of the productive base 12. Lacking this guidance, the way was open to a kind of bank-led privatised keynesianism (the construction and consumption bubble) that concealed - until the burst of the global crisis - the existence in the European peripheral countries of a demand and supply constraint to development: too narrow, in quantitative and qualitative terms, the productive base to respond effectively to external demand, the only dynamic demand component, given the deflationary effect of the Stability Pact on internal demand; too strong the forces protecting and freezing the status quo from the point of view of both institutions and productive specialization. As we anticipated, the MLP that we propose deals with system changes. They are labelled 'sociotechnical' because besides new technologies, they also entail changes in markets, user practices, policy and cultural meanings (Geels 2004 and 2010). The MLP views transitions as non-linear processes that results from the interplay of developments at three analytical levels, each including heterogeneous configurations: niches (the locus for radical innovations), socio-technical regimes (the locus of established business practices and associated rules that stabilize existing systems) and a (partly) exogenous socio-technical landscape (the wider context that influences niche and regime dynamics). A crucial aspect of the MLP is that transitions, that is regime shifts, come about through interacting processes within and between these levels (on this, see also Lane 2005). Geels (2010, p. 495) underlines that, "transitions do not come about easily, because existing regimes are characterized by lock-in and path dependence, and oriented towards incremental innovation along predictable trajectories...struggles between niches and regimes, and possible replacement, take place on multiple dimensions (e.g., markets, regulations, cultural meanings, infrastructure) and are enacted by interpretive actors that fight, negotiate, search, learn and build coalitions as they navigate transitions". In the case of the euro crisis, many discussions arise from the failure to recognize the diversity of the underlying ontology: 'atomistic' ontology is unable to communicate with multi-level ontology (that, in this case, includes productive systems, regions, states and interstate institutions). Similarly, the emphasis on price competitiveness, with its mono-dimensional feature, seems incompatible with the multi-dimensional complexity of changes considered by the MLP. The multi-dimensional character of innovation processes, involving changes in product, production process, markets, supplies / inputs and organization has been strongly emphasized by 13 Schumpeter (1992, [first edition 1942], p.84, italics added). We can analyze from this perspective the restructuring that took place in the German industry in the last ten years, and its impact on Europe, both East and West. Since 1999, the growth of the 12 Only after the monetarist counter-revolution fiscal policy was reinterpreted as short term assistance and compensatory finance. Now this public guidance over investment decisions would be called industrial policy. 13 Economists are at long last emerging from the stage in which price competition was all they saw. As soon as quality competition and sales effort are admitted into the sacred precincts of theory, the price variable is ousted from its dominant position. However, it is still competition within a rigid pattern of invariant conditions, methods of production and forms of industrial organization in particular, that practically monopolizes attention. But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control, for instance competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives. This kind of competition is as much more effective than the other as a bombardment is in comparison with forcing a door, and so much more important that it becomes a matter of comparative indifference whether competition in the ordinary sense functions more or less promptly; the powerful lever that in the long run expands output and brings down prices is in any case made of other stuff.
7 German economy was driven not only by exports but also by imports of parts and components. A general reorganization of production has been accompanied by a modification of the system of price setting by the exporting firms 14 : despite the wage restraint, relative prices were increased and those that are considered the traditional determinants of competitiveness appear to have contributed much less than expected to the expansion of exports, both in value and in quantity. The main determinants of the German export boom should be identified, according to Danninger and Joutz (2007) in these four circumstances: 1) improved cost competitiveness through wage restraint, 2) linkages with high growth markets, through an appropriate mix of products or the use of previous established links, 3) increase in exports of capital goods in response to the increased investment in emerging countries, 4) formation of a regionalized pattern of supply by moving out (offshoring) part of the production. These explanations are not mutually exclusive but the authors attribute the majority of the explanatory contribution of export growth to the second and fourth item. Also with respect to productivity, we find once again the problem of the plurality of levels of analysis and the difficulty of extrapolating at the aggregate level concepts and observations based on individual elementary units. As noted by Syverson (2011), the determinants of productivity can be divided into two groups, those that operate primarily within the company, under the control of the management, and factors external to the company, involving the level of demand, productivity spillovers, competition, deregulation and regulation, flexible inputs markets. When moving from the enterprise to higher levels, not only the determinants but also the measuring of productivity escapes the control of the company, since it requires the use of an aggregate price deflator. At the level of a country, unit labour costs are equal to the labour share in total value added multiplied by an aggregate price deflator. Between 1980 and 2007, observe Felipe and Kumar (p. 12) 15, in all European countries except Greece 16, given the general decline in the share of labour in the value added, the increase in unit labour cost is due solely to the increase of the price deflator. This has important implications since it transfers, at least in part, the problem of productivity increases from the rarefied field of technology, to the much more confrontational and mundane arena of income distribution. This finding may help explain, at least in part, a conclusion that Bayoumi et al. (2011) drew from an investigation of several measures of price competitiveness across European countries. They observed a "surprisingly large variation across.. four measures of extra and in particular intra-euro area relative prices in particular on prices based on wholesale prices, consumer prices, unit labour cost and export unit values". There is indeed a potentially circular element in the measurement of indicators of real exchange rate based on unit labour costs: in so far as the deflator used for the measurement of productivity coincides or approximates the one adopted in another indicator of relative prices, we will find a spurious correlation between indicators, which is implicit, by construction, in the use of the same price index in both the indicators. An interesting case is that of Italy (and to a lesser extent, Spain). The following graph (taken from Bayoumi et al. (2011) shows the trend of four indicators of real exchange rate between 1995 and What emerges is an enormous loss of competitiveness with regard to the indicator based on unit values of exports and, to a lesser extent, for the indicator of unit labour costs. Instead, the two indicators based on consumer prices and wholesale prices have a completely different trend, both showing only a slight appreciation over the period. This surprising divergence between the two groups of indicators stems from the fact that Italy (and Spain) used the unit values of exports (an index that 14 Cf. Stahn (2006). 15 Cf. Felipe and Kumar (2011). 16 As Felipe and Kumar (2011) observe, Greece had in 1980 the lowest share of wages on value added.
8 is affected by changes in quality of products and strategies 'pricing to market widespread especially in the luxury industry), instead of a price index for export 17, as the other countries do, in the calculation of the value added price deflator that is also used in the calculation of productivity. Hence, an apparent deterioration in competitiveness for the first two indicators that was not reflected in the other two. Since the indicators of real exchange are measures of relative competitiveness, to the overvaluation of the competitiveness deterioration of a country corresponds an overestimation of the competitiveness improvement of the countries with which the comparison is made. In 1947, Frisch addressed the issue of the accumulation of external imbalances between countries in a way that can still be fruitful. After recalling that in a non barter economy the demand must be supported by means of payment, he notes that the drive to specialization ( specialization effect ) in international trade encounters a limit in the need to find a paying outlet for the goods ( payment effect ). He believes illusory the idea that lower tariffs (prices) will lead to a trading system both multilateral and able to eliminate the bottleneck of the payment effect. To this end, Frisch constructs a trade matrix in which each element x ij represents the value of exports of country i to country j. If the ith row sum exceeds the i-th column, the amount is entered to the right of the i-th row as a surplus, otherwise at the bottom of the i-th column as a deficit. The ratio between the sum of the surpluses and total trade is a measure of skewness ranging from 0 (complete multilateral balance) and 100. Frisch notes that the skewness is "also an expression for the amount of liquid transfers or international lending that is needed". If "the trade skewness is not compensated in a reasonable time by a movement in the opposite direction, the tension is, through the credit system, allowed to accumulate, intensifying thus the difficulties". Frisch's object is to devise a policy oriented to prevent a vicious circle to developing in which, starting from unbalanced trade, each country would be forced to reduce proportionally their imports to the levels of their exports. He showed that this way of accomplishing a balanced trade went along with substantial reduction of total trade. If the policy objective is the reduction of the skewness with minimum reduction (and possible increase) in the total value of transactions, a better solution would be that deficit countries reciprocally intensify their import and export flows. It is not an easy task, but it would have the double advantage of sustaining income and reducing in the long run total financial liabilities. 3. Redirection of trade and East-ward enlargement 17 Cf. Banca d Italia (2009).
9 The EU-15 trade has undergone dramatic changes in the last two decades. While the trade with its traditional trading partners, especially the US, remains strong and steady, the trade with the CEE, CIS and Emerging Asian countries has expanded exponentially. The CEE region has emerged as the most important trading partner for the EU-15: between 1992 and 2008 exports of the EU-15 to the CEE countries increased almost 19 times ($428 bln compared to $393 bln for North America and $301 bln for Emerging Asia) (Figure 1), while imports increased 21 times. Figure 2. Trade Between the EU-15 and its Main Trading Partners CIS CEE Industrial Asia 263 (12.5) 168 (52.2) 386 (21.1) 428 (18.8) 100 (2.6) 124 (1.8) Euro-Med 196 (5.5) 185 (4.3) EU-15 Intra-Trade 3,050 (3.8) 301 (5.1) 493 (7.0) Emerging Asia 109 (4.2) 117 (4.6) 393 (3.6) 297 (2.8) 261 (35.0) 111 (12.1) Latin America US & Canada China Source: IMF, Direction of Trade Statistics and authors calculations. Note: Numbers in brackets indicate how many times trade flows increased between The evolution of the EU-15 trade in the last ten years can be seen in Figure 2, which highlights the increase of EU-15 exports to the CEE countries as well as the role of Emerging Asia as the number one exporter into the EU-15 ($493 bln in 2008, of which $261 bln from China alone)..
10 Source: IMF, Direction of Trade Statistics and authors calculations. These data raise two questions: 1. what kind of economic integration did this increase in trade entail; and 2. who has taken advantage of the east-ward orientation of the EU trade. The composition of trade. In the past two decades the change in the international organisation of industry and the diffusion and increasing regionalisation of supply chains have entailed a remarkable change in the pattern of industrial development and catching up. While before the recent wave of de-localisation and off-shoring of production, successful industrialisation meant the building up of domestic supply chains, today supply chains and off-shored production may offer opportunities for leap-frogging and/or speeding up the stages of take off (Baldwin 2011). Most of the CEE countries were offered the opportunity to integrate in the supply chains of EU countries, especially Austria and Germany. This can be seen in the composition of trade (see
11 Figure 3): intermediate goods have been the most dynamic element of trade: imports and exports of intermediate goods exceed the equally dynamic expansion of trade in final goods 18. Figure 3. Composition of Trade Between the EU-15 and the CEE Countries Source: UN, Comtrade Database and authors calculations. Value chains in the EU have long extended beyond the borders of national economies, though the East-ward expansion of the European industry has not been equally shared by all the old EU members. Austria and Germany (as we anticipated) have been quick to take advantage of cultural ties and closer borders, though Italian firms have also been very active in creating supply chains in South-Eastern countries. The German industry in particular has invested heavily in the neighbouring countries, integrating the new industries in its value chain (the bazaar economy). The progressive elimination of barriers for trade and investment, but not labour, generated 18 Between 1998 and 2008, the EU-15 exports of intermediate goods to the CEE countries increased 3.8 times, while the imports of intermediate goods from the CEE countries increased by 4.2 times. In the same time frame growth in the trade of final goods, both consumption and capital goods, has been equally dynamic. EU-15 exports of capital goods increased 3.7 times and imports to the EU-15 have increased 5.7 times. Trade in consumption goods has increased 4.1 and 3.3 times for exports and imports, respectively.
12 incentives to outsource only parts of manufacturing activity. It was mainly activities with a bias in favour of low and high skill requirements which were relocated, while activities requiring medium skills remained in the country. Empirical research concludes that the labour force with medium skills may have benefited more from eastern enlargement and found attractive work opportunities in the manufacturing sector (Coricelli et al. 2012): this generated scope for long term employment relationships, on-the-job training, incremental productivity, increasing innovation. Research demonstrates that delocalization of manufacturing in emerging Europe has sustained productivity in manufacturing, while contributing to the sharp fall in Germany s relative unit labour costs (Marin 2010b). Moreover, it suggests that the outsourcing activity of German and Austrian firms to the accession countries has actually helped to create jobs in the home country. According to Marin (2010), outsourcing some of the firm s activities to their CEE countries affiliates has helped Austrian and German firms to save between 65 to 80 percent of their labour costs, helping these firms to stay competitive in an increasingly competitive environment. Rather than competing with each other as alternative suppliers of the same final goods, affiliates in the CEE countries complement each other by supplying different components of the same final good. The German automotive industry argues Frank-Walter Steinmeier (2012) - is an outstanding example, as its competitiveness would be unthinkable without its network of suppliers in Central and Eastern Europe 19. By keeping inside the final stages of production, the pattern of German de-localisation seems to differ from the Italian (and perhaps the French) ones, which are based on the delocalization of the whole process, with obvious consequences on the value added (Deutsche Bundesbank, 2011): Has the South been cut-off from German supply chains? Have Germany s closer ties with the East entailed a diversion of trade and a weakening of ties with the rest of Europe, and in particular with the Southern European periphery? And has this led to an impoverishment of the matrix of production and trade network of the South of Europe? Table 4 presents the share of Germany s external trade with Europe s two peripheries: Southern and Centre-Eastern Europe It is possible to observe a redirection of trade away from the southern periphery towards the Eastern one, though the South continues to account for one third of Germany s trade surplus (table 5). Table 4 Germany: imports and exports by area Imports from Exports to South EU CEEC EU total Total Notes. Southern Europe includes: Cyprus, Malta, Greece, Italy, Spain; Portugal. CEEC: Estonia, Latvia, Lithuania, Czek Republic, Slovenia, 19 On average, each job in the industrial sector is also linked to two high-quality jobs in the service sector. In the automotive industry alone, each job creates five other jobs.
13 Slovakia, Hungary, Poland. Table 5 Germany: Balance of trade by area values values % % South EU CEEC EU Total Note: Million dollars. The changing role of the different areas of the enlarged EU in the division of labour has been stressed by the Bundesbank (Deutsche Bundesbank, 2011). Investigating who benefits most from a German expansion (either domestic or export-led), it observes that the German economy s strong rebound is spilling over to its neighbouring countries with a different strength, that mirrors the pattern of growth in Germany as well as their diverse specialisation patterns. The demand for intermediate goods, which the German economy normally covers through imports, favours especially the central and east European neighbouring countries, that rely relatively strongly on the export of intermediate goods. Conversely, Only with the Mediterranean countries is the interlinkage of the supply chains not very advanced so far. While the link with the East is strong also for capital goods 20, the spillover effects of German business activity tend to be weaker in countries which mainly deliver consumer goods to Germany and/or which are holiday destinations. This holds particularly for the Mediterranean countries (excluding France but including Portugal). Turkey and Italy s exports of consumer goods are more important than tourism, while Greece transport services almost match German tourists expenditures. The German economy concludes the report is currently exerting its strongest knock-on impulses on its eastern neighbours plus Austria and Switzerland. The production sites there are closely linked with German enterprises via supply chains...the spillover effect of Germany s strong economic recovery on the Mediterranean countries has remained subdued as their exports to Germany account for only a very small share of their aggregate economic output; they are focused on consumption related goods and services, which have not featured prominently in Germany s import growth hitherto. 21 Far from demonstrating a low activation potential of German growth, however, the Bundesbank s analysis illustrates the importance of which component of demand is mainly supporting growth: export-led growth is more intensive of intermediate inputs, thus 20 In the case of capital goods the regional structure is more concentrated. Switzerland and the Czech Republic specialise in supplying machinery and other equipment to German customers. The Slovak Republic has a higher weighting in motor vehicles and motor vehicle parts, followed some way behind by other central and east European countries and Spain. 21 The imports of intermediate goods from other European countries were boosted because many suppliers located there participated in German exporters strong sales performance, in particular in the rapidly expanding Asian markets. (Deutsche Bundesbank, Monthly Report March 2012).
14 resulting in imports from both the East and the West but not from Portugal and Greece, while domestic demand would give a larger impulse to more broadly geographically based imports of consumption goods. We can conclude that the spilling over of demand on neighbouring countries depends very much on the pattern of German growth: Europe benefits as much from German competitiveness as from domestic reflation. For sure, more buoyant demand in Germany would help economic rebalancing in deficit countries through the direct and indirect effects of an increase in German consumer goods imports. But the full operation of the international multiplier is somewhat damped by the inverse relation between the size of exports to Germany and the Export to Germany /Pil ratio. As the graph (Cobweb 1) suggests, external demand impulses coming from Germany will have a lower direct impact on larger Eurozone countries that on smaller ones, whose growth is going to be relatively more affected by external demand. In the last ten years, taking the Eurozone as a closed area, there has been a reduction in the share of the exports of peripheral countries to Germany accompanied by an increase (with the exception of Portugal) of the share of imports from Germany (see table 6). While the disentangling of composition, price and income effects behind the growing deficits of the different peripheral Eurozone countries would need further investigations, it seems apparent that their export base is at the moment too narrow to sustain a development driven only by external demand. Table 6 Exports to Germany over total Exports to euro area Imports from Germany over total Imports from Euro Area Greece 32,7 24,3 Italy 33,1 28,9 Portugal 29,1 20,6 Spain 21,5 19,1 France 31,1 29, ,3 36,6 49, ,2 24,9 33,5 38,8 53,4 54,7 4. The quality of exports As noted above, regional disequilibria within the euro area have been interpreted as indicating the loss of price competitiveness (often defined in terms of comparative unit labour costs). This would highlight the need for the implementation of structural labour market reforms and an across-the board austerity program to achieve an internal devaluation. In this perspective, empirical analyses have investigated the link between exports and trends in competitiveness across euro-area countries by the peripheral countries. This raises the problem of how to measure competitiveness. As we mentioned in section 2, Bayoumi et al. (2011) point at the surprisingly large variation across our four measures of extra- and (in particular) intra-euro area relative prices based on wholesale prices, consumer prices, unit labor costs, and export unit values 22. Undeterred from these findings, the authors proceed to estimate the relevant export elasticities. 22 Trying to solve the puzzle, they observe that For some countries, such as France and Ireland, the picture becomes clearer if one ignores the CPI price series that generate unconventional results in panel regressions on exports. But even ignoring the CPI series implies significant uncertainty in most other cases, including countries such as Germany and Spain.
15 They reach the conclusion that the results from export equations suggest that intra-euro area trade is several times more sensitive to changes in relative prices than extra-euro area trade. Indeed, these differences appear to have increased since the inception of EMU. The difference in elasticities is potentially important as it is much more difficult to adjust relative prices to restore competitiveness within a currency union. This approach is challenged by studies that, pointing at the analytical weakness of aggregate indicator of competitiveness, have focused their analysis on the structure and composition of production and trade. When disaggregated data are used observe Felipe and Kumar (2011, p. 27) - the comparison with Germany is, at least for some countries, misplaced Germany is not the correct comparator as its export basket is very different from that of the southern European countries and of Ireland. What would an across-the-board reduction in nominal wages of 20% 30% achieve? The most obvious effect would be a very significant compression of demand. But would this measure restore competitiveness? We argue that it would not allow many firms to compete with German firms, which have a different export basket, and in all likelihood it will not be enough to be able to compete with China s wages. Using an indicator of product complexity (see table 6) 23 the authors argue that peripheral countries lack of competitiveness vis-à-vis Germany is not due to the fact that they are expensive (their wage rates are substantially lower), or that labour productivity has not increased. The problem is that they are stuck at middle levels of technology and they are caught in a trap. Reducing wages would not solve the problem (ibid., p. 11). Source: Felipe and Kumar (2011). This does not yet support the claim that even if surplus countries expanded their imports, this would help their fellow euro-area countries to increase their exports only marginally. To answer 23 This indicator is the result of an iterative process which interacts two characteristics diversification and ubiquity of the export basket, the former relates to the country structure of exports and the latter to the complexity of the product. See Abdon et al. (2010) for a detailed analysis, and Aiginger (2000) for an early analysis along quality of exports indicators..
16 this question one needs to investigate the complementarity of the economies as well as the evolution of their structure of production. Some information on the convergence or divergence of specialization models across Eurozone countries before and after the formation of monetary union is provided by a comparison of the Spearman Rank correlation coefficients of Revealed comparative advantages (measured by the Balassa Index 24 ) with respect to Germany. From these bilateral comparisons (at SITC 2 digits level of disaggregation), we find that, with respect to Germany and Euroarea exports, there is a widening of the originary divergence of specialization models of Spain, Portugal and Greece. France and (increasingly, in the period considered) Austria appear to have specialization models close to Germany, while Italy s model, that started as rather divergent, is moving towards a lower divergence. When the comparison with Germany s specialization model is referred to exports to the world, the higher proportion of consumer goods in world export influences the results (which can explain the Netherlands result). Still, we find a cluster of countries closer to Germany s specialization (Austria, France and this time, thanks to auto, Spain) while Italy, Portugal and Greece seem more distant, even if the latter two countries are somewhat reducing their divergence. Table 7 Exports vs. Euro area. Spearman Rank correlation coefficients of Balassa indices (bilateral comparisons with Germany) Increase in Country convergence (+) Austria 0,03 0,33 0,30 Netherlands -0,17-0,22-0,05 France 0,35 0,34-0,01 Greece -0,31-0,33-0,02 Italy -0,19-0,03 0,16 Portugal -0,30-0,37-0,07 Spain -0,30-0,35-0,05 Source: Elaborations on UNCTAD data base, SITC 2 digits 24 The Revealed Comparative Advantage Index (Balassa Index) is defined as: (X ij /X j )/(X it /X T ) where X ij and X j are the exports of product i and total exports from country j, while X it and X T are exports of product i and total exports from the whole reference area.
17 Table 8 Exports vs. World. Spearman Rank correlation coefficients of Balassa Indices (bilateral comparisons with Germany) Increase in Country convergence (+) Austria 0,32 0,50 0,18 Netherlands 0,26 0,18-0,08 France 0,41 0,47 0,06 Greece -0,08 0,03 0,11 Italy 0,09 0,06-0,03 Portugal -0,14-0,01 0,13 Spain 0,22 0,31 0,09 Source: Elaborations on UNCTAD data base, SITC 2 digits While the rank correlation coefficient provides a summary measure of the divergence / convergence of patterns of specialization, a disaggregated comparison of the Balassa indices for exports of various countries versus the Eurozone can provide a detailed evidence of the heterogeneity of production structures. The data presented in Table 9 suggest three observations. On the whole, we find a relative permanence in time of productive specialization (we remind the reader, though, that we are considering a relatively broad product classification). Germany (and to a lesser extent France, and even less Italy) is characterised by relatively moderate values bigger than unity of the specialization indices, but they are diffused across a wide range of products. Peripheral countries, on the contrary, are characterised by very few (and constant in time) specialization products, often showing an extremely high value of the indices. If we extend the analysis to a comparison of Export and Import Balassa Indexes, (see table 10), we find that Germany in the years has reduced its import specialization in Miscellaneous Manufactured Products (code 8 of the SITC classification) where peripheral countries show an export specialization. This shift may be put in relation with the increase of the peripheral countries deficit. Further, we find that often peripheral countries show an import specialization in the same products for which they appear to have an export specialization. This result is compatible both with a negative import substitution and with a reduced diversification of exports.
18 (table 9 and 10 in separate files) These findings are all the more disturbing if we share the convincing suggestion advanced by Kellman and Shachmurove (2011), according to whom development is a combination of greater diversification 25 and a growing level of specialisation in the export composition. How has the relative degree of diversity and specialisation in peripheral and CEE countries been affected by the development of the last decade? In particular, has the slow growth euro-area negatively affected the possibility to achieve a greater diversification and specialisation of the productive structure? Or has it actually worsened it (as it seems to be the case for Southern Italy). And, conversely, has the increasing integration of the Central and Eastern European economies within the supply chain of the strongest part of German industry speeded up the process of diversification cum specialisation? As noted in the previous section, empirical research on the features of foreign direct investment and off-shoring of German industry to the East (Marin 2010; Coricelli 2011) find that, differently from other European countries, Germany has delocalised the stages of production requiring respectively lower and upper levels of skills and high capital intensity. Thus, off-shoring by German firms might have contributed to speed up the process of diversification and specialisation of Eastern countries, while the slow growth of the euro area might have contributed to the hollowing out of sectors of specialisation in the South. The process of east-ward economic integration of the German industry, combined with the low rate of growth of the euro area, might have gone hand in hand with a process of impoverishment of the productive matrix of southern European countries. 5. Policies for growth: rebalancing trade flows within the Euro zone If a consistent German expansion of domestic demand, though desirable, is unlikely on political ground (but see the recent opening of the German Finance minister and the Bundesbank in favour of a higher German inflation) it would also be unable to provide, by itself, a viable response to the long-term sustainability of the euro area. To this end, a rebalance in trade flows within the EU is required: the present unbalanced pattern of trade (with all EU countries increasing their import dependence from Germany while reducing their export dependence and, at the same time, with still a too low degree of intra-periphery trade) needs to be replaced with a truly multilateral network of trade flows. Differences in price competitiveness, it has been argued, are only part of the explanation of the disequilibria, with a much greater role being played by the composition (and direction) of exports: it is its quality that needs to be improved. To this effect, it will be necessary to dedicate appropriate, targeted investments, avoiding the past waste of public and private resources. We need to find areas of complementarities in the production structures of Southern European countries in order to analyse the scope for industrial and commercial policies in support of import substitution, product up-grading and export expansion, targeting a multi-dimensional reequilibrium: to privilege external trade flows with other countries of the euro-periphery; to promote external relations with the non-eu countries of the Mediterranean basin, in order to redress the increasing eastward skeweness of EU (German) trade. Southern countries all have 25 According to Cheptea et al. (2010), Germany s positive results on exports are related to the so-called "intensive margin", with an increase in exports in existing products rather than in new products.
19 more intense economic relations to western and central Europe rather than with each other. However, the south is the bridge to many of the neighbouring regions, and Greece especially is important as the ex Yugoslavian countries strive to become EU-members, and for Europe to build bridges towards Asia. Italy and Spain are essential for cooperation with North Africa, Spain and Portugal for Europe's cooperation with South America (Aiginger 2012, p. 6). In this paper we have mainly focused the attention to intra-eurozone trade flows, since an increase of intra-european integration may consent to reduce the costs and to reap the benefits of a monetary union. At the same time, increasing integration facilitates the creation of a political union. But we are aware that large proportion of the current account deficits and surpluses result from trade with countries outside the euro area, and not minor efforts should be dedicated to an enlarged policy. Finally, it is urgent also to rebalance the internal trade among the regions of the same country. Often in the past, being not exporting regions, they remained behind, creating by hysteresis productive capacity reductions and development bottlenecks. All this calls for an integrated industrial and trade policy. Since the establishment of the single market in 1986, European industrial policy has been based on the mono-dimensional principle of price competitiveness, with the Single Market and a horizontal industrial policy as its fundamental pillars. This so-called integrated approach to competitiveness condemns the old interventionist and politicized industrial policy, as well as the sector specific industrial policy. The term industrial policy itself went out of fashion in the mid 1990 s, replaced by competitiveness. Our analysis questions the contention that the quest for price competitiveness is the solution of the current crisis, neither in the short, nor in the long run. We need a new type of non hierarchical, multi-level based industrial activism. One that is capable to nurture regional clusters, favour differentiation and specialization, develops regional structures. Competition clusters and innovation networks involving companies, universities, research centres, technology service providers, educational institutions and business networks all help to strengthen value chains. Knowledge-intensive industrial sectors and services are concentrated in metropolitan areas. Innovative clusters and networks should be developed in a more targeted way to ensure that knowledge transfer, research, infrastructure, and further training are promoted in a coordinated manner. This requires strong and well-integrated industrial development agencies, operating on a regional level and with close knowledge of the warp and weft of the economic structure. Health, welfare, climate change and the environment have been noted as some of the most promising areas for new growth and job creation. The idea is to combine the handling of major societal challenges already in need of reform with the deliberate creation of new industries in these sectors. The objective is to solve important public problems, simultaneously achieving firstmover advantages in what are expected to become global growth markets.
20 References Abdon, A., Bacate, M., Felipe J. and Kumar, U. (2010), Product Complexity and Economic Development. Working Paper 616. Annandale-on-Hudson, NY: Levy Economics Institute of Bard College Aiginger, K. (2012), A systemic industrial policy to pave a new growth path for Europe, WIFO Working Papers, No. 421 February Baldwin, R. (2011), "Trade and Industrialisation after Globalisation s 2nd Unbundling: How Building and Joining a Supply Chain are Different and Why it Matters",NBER Working Paper No. w17716 Banca d Italia, (2008), Relazione del Governatore all Assemblea dei partecipanti, Roma. Bayoumi,T., Harmsen, R., and Turunen, J. (2011), Euro Area Export Performance and Competitiveness, IMF WP. No Cheptea et al., 2010 Cohen D. (1989), The costs and benefits of a European currency, in Giovannini A. and De Cecco M. (1989) Cohen D. (1993), Beyond EMU: the problem of sustainability, Economics & Politics, 5, 2. Commission Of the European Communities, (1977), Report of the Study Group on the Role of Public Finance in European Integration (Mac Dougall Report), vol. I, Brussels. Coricelli F. et al. (2012), Structural Change and the Current Account. The Case of Germany, IMF Danninger S. and Joutz F. (2007), What Explains Germany s Rebounding Export Market Share?, IMF Working Paper n. 24. Deutsche Bundesbank (2011), The Transmission and regional distribution of the German economy s cyclical impulses within Europe, Monthly Report, March. Eichengreen B. (1990), Currency Union, Economic Policy, April. Eichengreen B. (1993), European Monetary Unification, Journal of Economic Literature, 31. Felipe J. and Kumar U. (2011), Unit Labor Costs in the Eurozone: The Competitiveness Debate Again, Levy Economic Institute, Working Paper No. 651 Frisch R. (1947), On the Need for Forecasting A Multilateral Balance of Payments, American Economic Review, vol. XXXVII, 4, September. Geels F. (2004), From sectoral systems of innovation to socio-technical systems: insights about dynamics and change from sociology and institutional theory, Research Policy, 33. Geels F. (2010), Ontologies, socio-technical transitions (to sustainability), and the multi-level perspective, Research Policy, 39. Geels F. (2011), The multi-level perspective on sustainability transitions: responses to seven criticsms Environmental Innovation and Societal Transitions,1. Geels F.and Shot J.W. (2007), Typology of sociotechnical transitions pathways, Research Policy, 36. Giavazzi F. and Spaventa L. (2010), Why the current account may matter in a monetary union. Lessons from the financial crisis in the Euro area, CEPR Discussion Papers, 8008.
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Contents General overview... 3 Key Economic figures... 5 Main Economic trends... 6 Financial services sector... 11 Economic Outlook... 15 General overview The financial and economic crisis called for the
1 Introduction and Overview When I was young I thought that money was the most important thing in life. Now that I am old, I know it is. Oscar Wilde More and more of the world s currencies have floated
8 Economy In 2012, GNP in constant prices increased by 1.8% compared with 2011. The building and construction sector fell by 7.7% in value added terms in 2012 compared to 2011. Manufacturing industry decreased
For release at 8:30 a.m. EST February 10, 2016 Statement by Janet L. Yellen Chair Board of Governors of the Federal Reserve System before the Committee on Financial Services U.S. House of Representatives
European Monetary Union Chapter 20 1. Theory of Optimum Currency Areas 2. Background for European Monetary Union 1 Theory of Optimum Currency Areas 1.1 Economic benefits of a single currency Monetary effi
Fewer net errors and omissions, that is a new format of the balance of payments The size of net errors and omissions in the balance of payments decreased from 4.4% to 2.3% of GDP. This resulted from data
University Press Scholarship Online You are looking at 1-10 of 19 items for: keywords : current account deficits United States current account deficits: A stochastic optimal control analysis 1 in Stochastic
Survey on the Access to Finance of Enterprises in the euro area April to September 215 December 215 Contents Introduction 2 1 Overview of the results 3 2 The financial situation of SMEs in the euro area
Why is the Greek economy collapsing? A simple tale of high multipliers and low exports Cinzia Alcidi and Daniel Gros 21 December 2012 W hy is Greece still mired in recession? Why has GDP fallen by close
Executive summary Global Wage Report 2014 / 15 Wages and income inequality Global Wage Report 2014/15 Wages and income inequality Executive summary INTERNATIONAL LABOUR OFFICE GENEVA Copyright International
Chapter 17 Fixed Exchange Rates and Foreign Exchange Intervention Slide 17-1 Chapter 17 Learning Goals How a central bank must manage monetary policy so as to fix its currency's value in the foreign exchange
Trends in Foreign Direct Investment Inflows This article briefly examines recent trends in foreign direct investment in Australia, both in the context of the longer-term perspective and relative to the
Main trends in industry in 2014 and thoughts on future developments (April 2015) Development of the industrial sector in 2014 After two years of recession, industrial production returned to growth in 2014.
The War in Iraq and the Global Economy L. Josh Bivens Economic Policy Institute Washington, D.C. firstname.lastname@example.org Overview The global economy is fundamentally weak, suffering from insufficient aggregate
1 Supplemental Unit 5: Fiscal Policy and Budget Deficits Fiscal and monetary policies are the two major tools available to policy makers to alter total demand, output, and employment. This feature will
Why Treasury Yields Are Projected to Remain Low in 5 March 5 PERSPECTIVES Key Insights Monica Defend Head of Global Asset Allocation Research Gabriele Oriolo Analyst Global Asset Allocation Research While
Macroeconomic Imbalances Factsheet Introduction Since the outbreak of the credit crunch crisis in 2008, and the subsequent European debt crisis, it has become clear that there are large macroeconomic imbalances
Food & Farming Focus on Market Safety Nets December 215 Agriculture and Rural Development 1 AGRICULTURAL MARKETS AS A DRIVER FOR EUROPEAN AGRICULTURE The agricultural markets and their prices have evolved
Nominal exchange rate The nominal exchange rate between two currencies is the price of one currency in terms of the other. The nominal exchange rate (or, simply, exchange rate) will be denoted by the letter
1. A glimpse of the real sector: GDP, inflation rate, macroeconomic identities 1. Real sector and financial sector Macroeconomics studies the aggregate effects of what people do. Most of what people do
PENSIONS INVESTMENTS LIFE INSURANCE PERSONAL RETIREMENT SAVINGS ACCOUNT INVESTMENT REPORT FOR PERSONAL RETIREMENT SAVINGS ACCOUNT () PRODUCTS WITH AN ANNUAL FUND MANAGEMENT CHARGE OF 1% - JULY 201 Thank