Adjustment in Euro Area Deficit Countries: Progress, Challenges, and Policies

Tressel, Thierry; Wang, Shengzu; Kang, Joong Shik; Shambaugh, Jay C.; Decressin, Jörg; Brooks, Petya Koeva

doi:10.5089/9781498373814.006

Cited by 33 publications

(27 citation statements)

References 25 publications

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“…Euro member states such as Greece, Ireland and Spain recorded relatively high growth rates, high inflation rates and external deficits, while other countries, most prominently Germany, recorded low growth, low inflation and external surpluses. Largely as a result of the expenditure collapse during the crisis, many of the former deficit countries today record small current account surpluses, but whether these can be maintained if and when growth picks up remains an open question (Tressel et al., ). A sustainable rebalancing process, it is frequently argued, requires the surplus countries to stimulate domestic expenditure and inflate wages and prices, and the deficit countries to moderate expenditure and deflate.…”

Section: Introductionmentioning

confidence: 99%

Spillover effects of Germany's final demand on Southern Europe

Picek

Schröder

2018

World Economy

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We use data from the World Input‐Output Database to fit a closed multiregional input–output model in order to estimate the size of spillover effects of Germany's final demand on GDP, employment and the trade balance in Southern European countries. We find that spillover effects are rather small. Germany alone will hardly make a significant contribution to the external adjustment process in the European South.

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Section: Introductionmentioning

confidence: 99%

Spillover effects of Germany's final demand on Southern Europe

Picek

Schröder

2018

World Economy

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“…Such flaws were not a factor in the Asian case. Tressel and others () suggest that IMF staff was aware of the riskiness of these structural deficiencies. If staff realized this, one wonders whether it could have been more assertive in treating structural reform of the EMU as an explicit part of the troika programs.…”

Section: Effectiveness Of the Asian And Euro Area Resolution Programsmentioning

confidence: 99%

The Role of the IMF in Managing the Euro Area Sovereign Debt and Banking Crises: Perspectives from East Asia

Park¹

2017

Global Policy

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This paper analyzes strategies and policy conditionality of the troika – European Commission, European Central Bank, and IMF – in resolving the euro area crisis from Asia's perspective with the 1997 IMF Asian crisis management as a possible counterfactual and a yard stick for their effectiveness. The IMF entered into collaboration with the EU mainly to provide the technical expertise in and share with its European partners the lessons it learned from managing past crises. But many of these lessons have been unheeded – in particular limitations of the export‐led recovery through internal devaluation and the need to move forward with financial reform at an early stage of the crisis and calibrate supply side reform with the implementation capacity of the crisis countries.

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“…At the same time, in Greece the delay in structural changes affected the broadening of the scope of budgetary constraints. Through them conservation programs have begun to call into question the possibility of economic recovery, particularly because of the powerful social resistance to even those changes, which are necessary and obvious (Tressel et al, 2014, p. 1-34). On the other hand, the comparison of correction processes in the «old» member states of the euro area and the «new» ones makes it possible to change the angle of interpreting the problem of the rate, at which the countries overcome the imbalances streak.…”

Section: Imbalances In the Euro Area And Their Correction: Theoreticamentioning

confidence: 99%

The Magnitude of Financial Imbalances Correction and the Problem of Restoring Growth

Козюк

2017

JEE

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EMU imbalances correction sparked active discussions on choosing the optimal policy for mitigating risks of divergence and restoring competitiveness. Concentration on balance of payments is within the framework of simultaneously solving the problem of external imbalance, capital outflow, restoring growth, and preventing the opposing vectors of trajectory of the real effective exchange rates. However, overcoming the crisis consequences requires a wider approach to how the imbalances correction contributes to the growth recovery. Theoretically, the rate of post-crisis growth recovery should correspond with the variables that constitute imbalances correction. Based on regression analysis, it is clear that such hypothesis is proved only partially. Growth is more likely to recover if there is a more substantial correction of current account and credit market cleaning-up, whereas the correction on real estate market is not as effective. At the same time, real disposable income correction is likely to negatively influence the growth recovery. Nevertheless, this doesn’t mean that internal devaluation shouldn’t be utilized as an option during macroeconomic adjustment. It should occur with credit market cleaning-up. Fiscal space is crucial here, as it determines the credibility of fiscal policy devoted to mitigation of accumulated household sector debt burden. The reaction to the financial cycle is a fundamentally important element of macroeconomic management in the monetary union in regards to the macroeconomic design of integration zone.

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Adjustment in Euro Area Deficit Countries: Progress, Challenges, and Policies

Cited by 33 publications

References 25 publications

Spillover effects of Germany's final demand on Southern Europe

Spillover effects of Germany's final demand on Southern Europe

The Role of the IMF in Managing the Euro Area Sovereign Debt and Banking Crises: Perspectives from East Asia

The Magnitude of Financial Imbalances Correction and the Problem of Restoring Growth

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