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

Kang, Joong Shik; Shambaugh, Jay C.

doi:10.2139/ssrn.2307412

Cited by 5 publications

(2 citation statements)

References 8 publications

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“…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%

Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

Tressel

Wang

2014

SSRN Journal

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Section: Introductionmentioning

confidence: 99%

Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

Tressel

Wang

2014

SSRN Journal

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“…Regarding the underlying causes for these large current account deficits, the literature has indicated both poor export performance (Chen, Milessi-Ferreti, and Tressel, 2012;Berger and Nitsch, 2010;Bayoumi, Harmsen, and Turunen, 2011), and domestic boom and structural factors (Ivanova, 2012;Lane and Pels, 2012;Jaumotte and Sodsriwiboon, 2010). Kang and Shambaugh (2013) sort through different developments across these countries in the run-up to the crisis and highlight additional non-trade factors including the role of declining transfers and net income balances.…”

Section: Introductionmentioning

confidence: 99%

Progress Towards External Adjustment in the Euro Area Periphery and the Baltics

Kang

Shambaugh²

2014

IMF Working Papers

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The euro area periphery countries and the Baltic countries, which had large current account deficits in the run-up to the crisis, needed adjustment of relative prices to achieve both internal and external balances. Thus far, tangible progress has been made through lower wages and/or higher productivity relative to trading partners ("internal devaluation"), which contributed to narrowing current account deficits and shifting output towards the tradables sector. While some early adjusters cut wages more rapidly followed by productivity improvement, others have only slowly improved productivity largely through labor shedding. This adjustment for most countries has come along with a substantial recession as the unit labor cost improvement has largely come from falling employment and much of the current account improvement from import compression. Going forward, these countries still need to generate growing tradables sector employment and to continue adjustment to prevent imbalances from returning as output gaps close.

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Capital inflows, crisis and recovery in small open economies

Raza

Zoëga

Kinsella

2018

Finance Research Letters

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We compare two small open economics, Iceland and Ireland, that experienced a capital inflow through their banking systems in the period preceding the 2008 financial crises but differ in their currency arrangements. Both countries have mostly recovered from their respective crises, but the differences in the way their economies adjusted are interesting. The evidence suggests that changes in the real exchange rate served as the adjusting mechanism for Iceland's current account while in Ireland domestic demand compression served as the main adjustment mechanism. We also explore the adjustment to the crisis in three other Eurozone economies and find that they were similar to the one in Ireland.

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

Cited by 5 publications

References 8 publications

Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments

Progress Towards External Adjustment in the Euro Area Periphery and the Baltics

Capital inflows, crisis and recovery in small open economies

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