Persistent Macroeconomic Imbalances in the Euro Area: Causes and Consequences
By N. Holinski, C. Kool, J. Muysken. 2012
127 citations recorded by the source corpus.
In this paper, the authors document a growing divergence between current account imbalances in northern and southern euro area countries from 1992 to 2007. The imbalance occurred without a con comitant rise in productivity and growth in the southern (deficit) countries. The authors argue that sys tematic monitoring of external imbalances and implementation of better coordinated policies to prevent the emergence of unsustainably large imbalances in the euro area is advisable because (i) country hetero geneity and the absence of optimal currency area characteristics may lead to the emergence of large cur rent account imbalances without automatic gains in productivity and economic growth to sustain these imbalances, (ii) the absence of sufficient market-based adjustment mechanisms substantially increases the costs of ultimate adjustment toward more sustainable current account positions, and (iii) large exter nal imbalances—particularly through the major role of the banking system—potentially have strong negative consequences for fiscal policy. (JEL F15, F32, F41)
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/db4228db30d2203cd1d0df16365c716e95093138
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Citations in the corpus
- Comparative Institutional Advantage in the European Sovereign Debt Crisis (2014, background): “It fails, however, to provide specific explanations as to what fostered internal adjustment mechanisms within the EMU core (Austria, Belgium, Finland, France, Germany and the Netherlands) which were largely absent within the EMU periphery (Greece, Ireland, Italy, Portugal and Spain) – even though ma”