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Europe’s Trade Surplus, International Relative Prices, and the Productivity Growth Gap

par Ifrim, Adrian;Kollmann, Robert ;Pfeiffer, Philipp;Ratto, Marco;Roeger, Werner
Publication Publié, 2025-09-04

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Résumé :

The Euro Area faces persistently weak productivity growth alongside a sustained trade surplus and a trendless real exchange rate. This column shows that persistent productivity growth differentials relative to the rest of the world, are a key driver of Europe’s external surplus. Structural trade shifts, such as declining home bias and falling import prices, have offset the appreciation pressures from the productivity-growth gap. Weak domestic investment is partly driven by global forces, highlighting the limits of purely demand-based explanations and associated policy prescriptions.