Have domestic or foreign factors driven European external imbalances?
AbstractThis paper examines whether domestic or foreign net saving predominantly influences an economy's international borrowing and lending with reference to the experience of western European economies that have had sizable current account surpluses and deficits since the turn of the century. It proposes that if an international lender country's current account surplus is positively (negatively) related to its real long term interest rate, then foreign (domestic) factors are driving its external imbalance. On the contrary, for a foreign borrower country if its current account deficit is positively (negatively) related to its real long term interest rate, domestic (foreign) factors drive its external imbalance. On this basis, it shows econometrically for major European lender economies, Germany, the Netherlands, Switzerland and Sweden, that external imbalances this decade were mainly determined by foreign factors, though by domestic factors for Norway. For major borrower economies, Italy, Spain, Portugal, Ireland and the United Kingdom, the results were not significant implying that neither domestic nor foreign factors predominated over this time.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 30 (2011)
Issue (Month): 3 (April)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443
Saving Investment Current account imbalances International borrowing and lending Europe Real interest rates;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Muge Adalet & Barry Eichengreen, 2007.
"Current Account Reversals: Always a Problem?,"
in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 205-246
National Bureau of Economic Research, Inc.
- Freund, Caroline, 2005. "Current account adjustment in industrial countries," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1278-1298, December.
- Anthony J. Makin, 2004. "The Current Account, Fiscal Policy, and Medium-Run Income Determination," Contemporary Economic Policy, Western Economic Association International, vol. 22(3), pages 309-317, 07.
- Bergin, Paul R & Sheffrin, Steven M, 2000.
"Interest Rates, Exchange Rates and Present Value Models of the Current Account,"
Royal Economic Society, vol. 110(463), pages 535-58, April.
- Paul Bergin & Steven Sheffrin, . "Interest Rates, Exchange Rates And Present Value Models Of The Current Account," Department of Economics 97-22, California Davis - Department of Economics.
- Steven M. Sheffrin & Paul Bergin, 2003. "Interest Rates, Exchange Rates And Present Value Models Of The Current Account," Working Papers 9722, University of California, Davis, Department of Economics.
- Ghosh, Atish R & Ostry, Jonathan D, 1995. "The Current Account in Developing Countries: A Perspective from the Consumption-Smoothing Approach," World Bank Economic Review, World Bank Group, vol. 9(2), pages 305-33, May.
- Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
- Martin Feldstein & Charles Horioka, 1979.
"Domestic Savings and International Capital Flows,"
NBER Working Papers
0310, National Bureau of Economic Research, Inc.
- Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals, and Sudden Stops," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 1-49, June.
- Frenkel, Jacob A & Razin, Assaf, 1987. "Fiscal Policies and the World Economy; An Intertemporal Approach (Cambridge, Mass.: MIT Press, 1987)," MPRA Paper 20438, University Library of Munich, Germany.
- Jacques Miniane & BenoÃ®t Mercereau, 2004. "Challenging the Empirical Evidence From Present Value Models of the Current Account," IMF Working Papers 04/106, International Monetary Fund.
- Blanchard, Olivier & Giavazzi, Francesco & Sa, Filipa, 2005.
"The US Current Account and the Dollar,"
CEPR Discussion Papers
4888, C.E.P.R. Discussion Papers.
- Mansoorian, Arman, 1998. "Habits and durability in consumption, and the dynamics of the current account," Journal of International Economics, Elsevier, vol. 44(1), pages 69-82, February.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.