Dutch disease, real effective exchange rate misalignments and their effect on GDP growth in EU

Core countries have been only slightly undervalued from the crisis onwards, while the periphery was overvalued. However, the gap for the periphery has reduced in the last two years. As regards the new member states, these were overvalued for the entire time span. The results seem to be generally driven by the inflows of bank loans. The misalignments are associated with lower long-run growth. The exchange rate volatilities are not robust in affecting GDP growth, while spillovers and global factors seem to matter in all the specifications both in the short and long run.