25 Jul 2013

Macroeconomic Scenarios for the Euro-Mediterranean Area

Quantification based on the GEM-E3 model

Leonidas Paroussos / Kostas Fragkiadakis / Ioannis Charalampidis / Stella Tsani / Pantelis Capros

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This study quantifies four alternative macroeconomic scenarios for the southern and eastern Mediterranean countries (SEMCs), with the use of GEM-E3, a general equilibrium model. The four scenarios are: i) the continuation of current policies, ii) southern Mediterranean–EU cooperation, iii) a global opening of the southern Mediterranean countries and cooperation with the rest of the Middle East and other developing countries like China, and iv) a deterioration in the regional political climate and a failure of cooperation. Explicit assumptions on trade integration, infrastructure upgrade, population growth and governance developments are adopted in each scenario. The simulation results indicate that an infrastructure upgrade and governance improvements in the context of SEMC–EU cooperation could benefit most of the countries under consideration. The analysis remains important in light of ongoing regional developments and the need to design the best policies to pursue in the aftermath of the Arab spring.

Leonidas Paroussos, Kostas Fragkiadakis, Ioannis Charalampidis and Stella Tsani are Fellows at ICCS/NTUA – E3MLab-, Athens. Pantelis Capros is the Director of E3M Lab.

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