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On the Origin of European Imbalances in the Context of European Integration

Author

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  • Carlos A. Carrasco
  • Patricia Peinado

Abstract

We study the origin of European imbalances in the context of European integration. As a whole, the European Union and Eurozone have had nearly balanced external accounts. However, member countries have presented divergent positions. We analyse the short-term and medium-term factors underlying the presence of European external imbalances. Our results reveal the existence of divergent trends in key macroeconomic variables within the Eurozone. Moreover, the current account (CA) responds in the short-term to real unit labour cost (ULC) and discretionary fiscal policy. However, we point out the possible existence of a structural component of the CA. When assessing the medium-term determinants of the CA imbalances, catching-up, old-age dependency ratio and country-level specialisation (non-price competitiveness) are relevant variables explaining those imbalances. Key words: Current account, European imbalances, European integration, Competitiveness, Catching-up.JEL: E61, E62, E65, H62, H63.

Suggested Citation

  • Carlos A. Carrasco & Patricia Peinado, 2015. "On the Origin of European Imbalances in the Context of European Integration," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(2), pages 177-191.
    • Handle: RePEc:voj:journl:v:62:y:2015:i:2:p:177-191:id:396
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    Cited by:

    1. Nina Dodig & Hansjorg Herr, 2015. "EU policies addressing current account imbalances in the EMU: an assessment," Working papers wpaper74, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    2. Eckhard Hein & Daniel Detzer, 2014. "Coping with imbalances in the Euro area: Policy alternatives addressing divergences and disparities between member countries," Working papers wpaper63, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    3. Georgescu, George, 2016. "Prospects of Romania’s international investment position and financial stability risks," MPRA Paper 69501, University Library of Munich, Germany.
    4. Nina Dodig & Hansjörg Herr, 2015. "Current Account Imbalances in the EMU: An Assessment of Official Policy Responses," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(2), pages 193-216, June.
    5. Eckhard Hein & Daniel Detzer, 2015. "Post-Keynesian Alternative Policies to Curb Macroeconomic Imbalances in the Euro Area," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(2), pages 217-236, June.

    More about this item

    Keywords

    Current account; European imbalances; European integration; Competitiveness; Catching-up;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F15 - International Economics - - Trade - - - Economic Integration
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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