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A note on European external imbalances and the euro adoption

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  • Carlos A. Carrasco

    (School of Economics, National Polytechnic Institute)

Abstract

In this note, we empirically investigate the effects of the euro adoption in the current account in the Eurozone (EA). As a whole, EA countries have presented a current account close to balance. However, at the individual level, EA countries have presented significant and persistent divergences in their current account balances. We implement a differences-in-differences approach using EU-27 and OECD high-income countries as control groups with robust estimation techniques. Our results show evidence of significant effects of the euro adoption in the current account for the EA-12 countries, especially for the GIIPS (Greece, Italy, Ireland, Portugal, and Spain) countries. Moreover, the current account balance in the euro period is positively related to the current account balance of the pre-euro era.

Suggested Citation

  • Carlos A. Carrasco, 2015. "A note on European external imbalances and the euro adoption," Economics Bulletin, AccessEcon, vol. 35(4), pages 2104-2109.
    • Handle: RePEc:ebl:ecbull:eb-15-00036
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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I4-P214.pdf
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    References listed on IDEAS

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    1. Massimo Cingolani, 2013. "Finance Capitalism: A Look at the European Financial Accounts," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(3), pages 249-290, May.
    2. Campa, Jose Manuel & Gavilan, Angel, 2011. "Current accounts in the euro area: An intertemporal approach," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 205-228, February.
    3. Schmitz, Birgit & von Hagen, Jürgen, 2011. "Current account imbalances and financial integration in the euro area," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1676-1695.
    4. Carlos A. Carrasco & Felipe Serrano, 2014. "Global and European Imbalances:A critical review," Working papers wpaper42, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    5. Ansgar Belke & Christian Dreger, 2013. "Current Account Imbalances in the Euro Area: Does Catching up Explain the Development?," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 6-17, February.
    6. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 147-210.
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    Cited by:

    1. Cristian Păun, 2016. "The Adoption Of Euro In Case Of Romania: The Main (Counter) Arguments," Review of Social and Economic Issues, Romanian-American University, vol. 1(3), pages 76-94, march.

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    More about this item

    Keywords

    European imbalances; current account; euro adoption; GIIPS;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F5 - International Economics - - International Relations, National Security, and International Political Economy

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