Advanced Search
MyIDEAS: Login

External imbalances and financial fragility in the euro area

Contents:

Author Info

  • Pietro Alessandrini

    () (Universit… Politecnica delle Marche, MoFiR)

  • Michele Fratianni

    () (Indiana University, Kelly School of Business, Bloomington US, Univ. Plitecnica Marche and MoFiR)

  • Andrew Hughes Hallett

    () (George Mason University)

  • Andrea Filippo Presbitero

    () (Universit… Politecnica delle Marche, MoFiR)

Abstract

This paper presents two views of the European sovereign debt crisis. The first is that the South in the euro zone has been fiscally irresponsible, and has failed to implement supply-side policies such as liberalizing labor markets and the market for services. The second view holds that the crisis reflects a deep divide between the external surpluses of the North and external deficits of the South. Basic stylized facts raise some doubt about the validity of the thesis that the debt crisis in the Eurozone is driven primarily by fiscal fragility in the South. A relatively simple model shows how poor fundamentals can create a debt problem independently of fiscal responsibility. The empirical analysis of the determinants of government bond yield spreads relative to Germany suggests that both views in fact provide useful insights into the roots of the current sovereign crisis. Fiscal fragility and external imbalances explain a significant share of the widening spreads since the onset of the global financial crisis. However, differences in labor productivity growth between North and South assume a much relevant role since the Greek crisis erupted in 2010.

Download Info

If 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.
File URL: http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir066.pdf
File Function: First version, 2012
Download Restriction: no

Bibliographic Info

Paper provided by Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences in its series Mo.Fi.R. Working Papers with number 66.

as in new window
Length: 46
Date of creation: May 2012
Date of revision:
Handle: RePEc:anc:wmofir:66

Contact details of provider:
Postal: Piazzale Martelli, 8 6012 Ancona
Phone: +39 071 220 7083
Fax: +39 071 220 7102
Email:
Web page: http://sites.google.com/site/mofirunivpm/
More information through EDIRC

Related research

Keywords: Sovereign yield spreads; adjustment burden; external imbalances; monetary union;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Hans-Werner Sinn & Timo Wollmershaeuser, 2011. "Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility," NBER Working Papers 17626, National Bureau of Economic Research, Inc.
  2. Emiliano Brancaccio, 2008. "Deficit commerciale, crisi di bilancio e politica deflazionista," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2008(96), pages 109-128.
  3. Alois Geyer & Stephan Kossmeier & Stefan Pichler, 2004. "Measuring Systematic Risk in EMU Government Yield Spreads," Review of Finance, Springer, vol. 8(2), pages 171-197.
  4. Michele Fratianni, 2012. "The Future International Monetary System: Dominant Currencies or Supranational Money? An Introduction," Open Economies Review, Springer, vol. 23(1), pages 1-12, February.
  5. Salvador Barrios & Per Iversen & Magdalena Lewandowska & Ralph Setzer, 2009. "Determinants of intra-euro area government bond spreads during the financial crisis," European Economy - Economic Papers 388, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  6. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2009. "Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market," Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 925-957, March.
  7. Matthew Higgins & Thomas Klitgaard, 2011. "Saving imbalances and the euro area sovereign debt crisis," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Sept.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Europa: una crisi di debito o di bilancia dei pagamenti?
    by keynesblog in Keynes Blog on 2012-05-23 14:01:03
  2. Aby zwalczyć kryzys potrzeba innych narzędzi politycznych
    by k.mokrzycka in Obserwator Finansowy on 2012-05-29 04:01:21
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Michele Fratianni, 2012. "150 years of Italian political unity and economic dualism: An Introduction," Mo.Fi.R. Working Papers 73, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Rosaria Rita canale & Ugo Marani, 2012. "Current account and fiscal imbalances in the Euro-area: Siamese twins in an asymmetrical currency union," Department of Economics University of Siena 659, Department of Economics, University of Siena.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:anc:wmofir:66

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maurizio Mariotti).

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.