"
A popular view is that the
peripheral economies grew into overvaluation because of excessive inflation
relative to Germany. This position has been fortified by figure 1, which shows
the
movement of the unit-labor-cost-based REERs of six European countries relative to other members of the euro area since the start of the euro up until the present day. The six countries shown are Germany and the five countries in crisis. The real effective exchange rate is based on 1999 = 100. This chart suggests that the countries now in crisis have brought their woes upon themselves by inflating far more than in Germany (or, alternatively, that Germany has been the source of the problem because of excessive wage compression)..."
at http://www.piie.com/publications/pb/pb11-18.pdf
movement of the unit-labor-cost-based REERs of six European countries relative to other members of the euro area since the start of the euro up until the present day. The six countries shown are Germany and the five countries in crisis. The real effective exchange rate is based on 1999 = 100. This chart suggests that the countries now in crisis have brought their woes upon themselves by inflating far more than in Germany (or, alternatively, that Germany has been the source of the problem because of excessive wage compression)..."
at http://www.piie.com/publications/pb/pb11-18.pdf
