External Imbalances in the Euro Area

Chen, Ruo; Milesi‐Ferretti, Gian Maria; Tressel, Thierry

doi:10.2139/ssrn.2263581

Cited by 7 publications

(12 citation statements)

References 20 publications

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“…In contrast to the other countries, Italy did not have a large current account deficit to GDP ratio at the start of the crisis, and had modest net foreign liabilities in percent of GDP but these are still large in absolute terms. In this paper, we follow Chen et al (2012) and include Italy in the country sample. ©International Monetary Fund.…”

Section: Introductionmentioning

confidence: 99%

“…4 The existing literature has emphasized various aspects of the current accounts before the crisis, but few have studied the more recent developments. A number of papers have emphasized the contribution from trade performance (see among others, Berger and Nitsch, 2010, Chen et al, 2012, Bayoumi, Harmsen and Turunen, 2011 , overvalued exchange rates and their structural determinants (Blanchard, 2007;Jaumotte and Sodsriwiboon, 2010;Ivanova, 2012;Lane and Pels, 2012), or declining transfers and net income balances (Kang and Shambaugh, 2013). Other recent papers including Atoyan, Manning, and Rahman (2013) and Nkusu (2013) have analyzed export performance, the saving-investment balances and the financing of the current accounts in several EU countries since the crisis.…”

Section: Introductionmentioning

confidence: 99%

“…More recent papers concluded that exuberant investors fuelled domestic demand booms in deficit economies in search of higher yields (IMF, 2011). Capital flowed steadily from core euro area countries, especially Germany and France (and the United Kingdom in the case of Ireland), mostly towards deficit countries' sovereigns or banks (Chen et al, 2012). As sovereign ratings converged, markets adopted pro-cyclical behaviors, and risks were not priced in (Laeven and Tressel, 2013).…”

Section: Introductionmentioning

confidence: 99%

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Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

Tressel

Wang

2014

SSRN Journal

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

Tressel

Wang

2014

SSRN Journal

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“…Even when wages grow in line with productivity growth, a country could lose niche markets if they cannot move up the value chain while their trading partners increase the quality of export goods. In this case, weak export performance is captured by quantity measures, while price measures may not capture this type of competitiveness problems (see Chen, Milesi-Ferretti, and Tressel, 2012).…”

Section: A Exportsmentioning

confidence: 99%

“…A series of papers examine the export performance of these countries. Chen, Milesi-Ferretti, and Tressel (2012) make an important contribution examining the way in which some of these countries may have been left out of certain parts of the global value chain. They highlight the fact that the peripheral euro countries saw rising imports from emerging Asia, but were not substantial exporters to this region.…”

Section: Introductionmentioning

confidence: 99%

The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics: Many Paths to the Same Endpoint

Kang

Shambaugh

2013

SSRN Journal

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External and Macroeconomic Adjustment in the Larger Euro‐Area Countries

Angelini

Zorzi²,

Aerssen³

2016

International Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The paper is released in order to make the research of CompNet generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB, the ESCB, and of other organisations associated with the Network. Terms of use: Documents in EconStor may AcknowledgementsWe are grateful for the insightful comments by L. Dedola, A. Dieppe, G. Kenny, G. Lombardo, M. Rubaszek, F. Smets as well as participants of ECB and ESCB seminars. The views expressed are those of the authors and do not necessarily reflect those of the ECB. Elena AngeliniEuropean Central Bank; e-mail: elena.angelini@ecb.europa.euMichele Ca' Zorzi European Central Bank; e-mail: michele.cazorzi@ecb.europa.eu Katrin ForsterEuropean Central Bank; e-mail: katrin.forster@ecb.europa.eu AbstractA balanced current account in the euro area has disguised sizeable net lending imbalances at the country level, exposing the common currency area to severe pressures during the …nancial crisis.The key contribution of this paper is to evaluate the adjustment process through the lenses of the New Multi Country Model at the country and sectoral level. We …nd that shocks to the external, …scal and monetary environment help explain, to a large degree, the sizable current account adjustment and rise in unemployment in Spain. The model also suggests that a recovery in wage competitiveness helps to reduce external de…cits at the cost of higher net borrowing by households. The stimulus e¤ects on aggregate demand, via the interest rate response of the common monetary authority and the competitiveness channel, are present but not overly large, as the rebound in economic activity depends mainly on global demand, supportive monetary policy, business and consumer con…dence.Key words: net lending, euro area countries, current account, modeling JEL Classi…cation: C5, F32, F41, O52. NON-TECHNICAL SUMMARYThe current account in the euro area has historically been close to balance. The presence of de…cits and surpluses across the di¤erent participating members was not generally perceived as a major policy issue, as e.g. the Spanish de…cit was o¤set by the German surplus (Williamson, 2007).The sizable net borrowing by the euro area public sector was instead o¤set by the net savings of the euro area private sector. Following the …nancial crisis the academic literature has moved from a largely beni...

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External Imbalances in the Euro Area

Cited by 7 publications

References 20 publications

Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics: Many Paths to the Same Endpoint

External and Macroeconomic Adjustment in the Larger Euro‐Area Countries

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