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Money Overhang, Credit Overhang and Financial Imbalances in the Euro Area

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  • Clemens Kool
  • Erik de Regt
  • Tom van Veen

Abstract

This paper focusses on the relation between external imbalances and domestic money and credit growth in the euro area. We compute money and credit overhang both for the euro area as a whole and for individual member countries. Our results show that both aggregate money and credit overhang have trend-like increased since the early 2000s. The increase in money overhang has been rather evenly spread over the member states but the increase in credit overhang has been unevenly spread and has mainly occurred in the GIIP. We apply panel analysis to detect temporal patterns between the developments in money overhang, credit overhang and external indebtedness. Looking at the groups of GIPS countries in isolation, net debt flows do play a significant role to explain money and credit overhang.

Suggested Citation

  • Clemens Kool & Erik de Regt & Tom van Veen, 2013. "Money Overhang, Credit Overhang and Financial Imbalances in the Euro Area," CESifo Working Paper Series 4476, CESifo.
    • Handle: RePEc:ces:ceswps:_4476
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    References listed on IDEAS

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    Cited by:

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    3. Unger, Robert, 2017. "Asymmetric credit growth and current account imbalances in the euro area," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 435-451.
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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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