External Imbalances in the Euro Area
IMF Working Papers, September 28, 2012
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- External Imbalances in the Euro Area
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Bibliographic details
- Authors: Ruo Chen, Gian M Milesi-Ferretti, Thierry Tressel
- Published: September 28, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475524673.001
Overview and research question
- Authors: Ruo Chen, Gian M Milesi-Ferretti, Thierry Tressel
- Publication date: September 28, 2012
- Paper examines the extent to which current account imbalances of euro area countries are related to:
- intra-euro area factors, and
- external trade shocks.
Key findings
- Traditional explanations for rising imbalances are correct but incomplete.
- Large impact of:
- declines in export competitiveness, and
- asymmetric trade developments vis-à-vis the rest of the world,
- in particular vis-à-vis China, Central and Eastern Europe, and oil exporters,
on the external balance of euro area debtor countries.
- While current account imbalances of euro area deficit countries vis-à-vis the rest of the world increased, they were financed mostly by intra-euro area capital inflows, notably:
- the purchase of government and financial institutions’ securities, and
- cross-border interbank lending.
- These intra-euro area financings permitted external imbalances to grow over time.
Subjects and keywords (as provided)
- Subjects: Demand elasticity, Economic theory, Exports, Foreign exchange, Imports, International trade, Real exchange rates, Trade balance
- Keywords: area country; area debtor countries; area export; Asia and Pacific; debtor country; demand elasticity; Demand elasticity; euro; euro area; export; Exports; external imbalances; financial integration; Imports; Real exchange rates; Southern Europe; terms of trade; terms of trade shocks; Trade balance; WP