This paper aims to examine the determinants of competitiveness of some major EU countries. In the present analysis we focus on selected North and South EU members. Using monthly data for France, Germany, Italy, Spain and the UK, the linkage among real effective exchange rate, terms of trade, industrial production and interest rates is investigated. Initially, the variables under consideration are tested for unit roots in the presence of structural breaks, using the two-break LM test developed by Lee and Strazicich. The number of cointegrating relations is examined using the Johansen-Mosconi-Nielsen test, which allows for structural breaks and is based on the Johansen multivariate procedure. Based on that, a long-term relation among the above variables is specified for each country, and the corresponding VECM is estimated.
(EN)
University of Crete
