Macroeconomic Imbalances in the Euro Area: Symptom or cause of the crisis?
AbstractLax financial conditions can foster credit booms. The global credit boom of the last decade led to large capital flows across the world, including large movements of resources from the Northern countries of the euro area towards the Southern part. Since the start of the crisis and more markedly after 2009, these flows have suddenly stopped, creating severe adjustment pressures. This paper argues that, at this point, the common monetary policy can only try to mitigate the unavoidable adjustment by maintaining overall financial stability. The challenge is to strike a delicate balance between providing liquidity for solvent institutions while keeping the overall pressure on for a rapid correction of the imbalances.
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Bibliographic InfoPaper provided by Centre for European Policy Studies in its series CEPS Papers with number 6865.
Length: 12 pages
Date of creation: Apr 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-01 (All new papers)
- NEP-CBA-2012-07-01 (Central Banking)
- NEP-MAC-2012-07-01 (Macroeconomics)
- NEP-MON-2012-07-01 (Monetary Economics)
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.:
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