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The Fiscal Compact and Current Account Patterns in Europe

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  • Stefan Behrendt

    (Graduate Programme "Global Financial Markets")

Abstract

This paper shall give an overview of the implications to the sectoral balances stemming from the implementation of the Fiscal Compact in the Euro area in 2013. Since there is now a more or less strict limit to deficit spending-absent from cyclical factors-some other sector has to make up for the reduction of the financial deficit of Euro area gov- ernments. While applying sensible estimates on the trajectories of the sectoral balances in the Euro area, I reach the conclusion that the only logical outlet for these (potentially) reduced deficits would be the for- eign sector, reflecting the inability of the private sector to run a sizeable surplus of investments over savings over the long-run. Under the sce- nario described in the paper, the Euro area would run a considerable current account surplus in the foreseeable future.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena in its series Global Financial Markets Working Paper Series with number 2014-52.

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Date of creation: 26 Mar 2014
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Handle: RePEc:hlj:hljwrp:52-2014

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Web page: http://www.gfinm.de

Related research

Keywords: fiscal policy; Fiscal Compact; current account; sectoral balances;

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  1. Sebastian Dullien & Mark Schieritz, 2011. "Die deutsche Investitionsschwäche: Die Mär von den Standortproblemen," Wirtschaftsdienst, Springer, Springer, vol. 91(7), pages 458-464, July.
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  5. Katja Rietzler & Dieter Teichmann & Achim Truger, 2013. "IMK Steuerschätzung 2013-2017," IMK Report, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 81-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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  7. Eckhard Hein & Achim Truger, 2014. "Fiscal Policy and Rebalancing in the Euro Area: A Critique of the German Debt Brake from a Post-Keynesian Perspective," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(1), pages 21-38, Februar.
  8. Casadio, Paolo & Paradiso, Antonio, 2010. "Private sector balance, financial markets, and U.S. cycle: A SVAR analysis," MPRA Paper 28105, University Library of Munich, Germany.
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