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Europe and Global Imbalances

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  • Philip R. Lane
  • Gian-Maria Milesi-Ferretti

Abstract

Although Europe in the aggregate is a not a major contributor to global current account imbalances, its trade and financial linkages with the rest of the world mean that it will still be affected by a shift in the current configuration of external deficits and surpluses. We assess the macroeconomic impact on Europe of global current account adjustment under alternative scenarios, emphasizing both trade and financial channels. Finally, we consider heterogeneous exposure across individual European economies to external adjustment shocks.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/144.

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Length: 59
Date of creation: 01 Jun 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/144

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Keywords: Capital flows; Current account balances; current account; foreign assets; net foreign assets; currency composition; exchange rates; net foreign asset; foreign asset; financial integration; external liabilities; international financial; current account deficit; foreign asset positions; current account adjustment; net foreign asset positions; current account balance; net foreign asset position; foreign asset position; net debt; domestic currency; international financial integration; international investment; globalization; current account deficits; foreign exchange; trade patterns; balance of payments; bilateral trade; public debt; reserve bank; current accounts; foreign liabilities; international finance; current account surpluses; net external liabilities; direction of trade statistics; central banks; financial globalization; international trade; current account surplus; central bank; international balance sheet; external borrowing; reserve currency; financial markets; net debtor; global liquidity; debtor countries; debtor country; economic integration; debt service; international financial markets; external shocks; global markets; external debt; net external debt; short-term debt; currency debt; foreign debt; economic globalization; international borrowing; global integration; domestic investors; net debtors; return on foreign assets; long-term debt; government debt; debt-equity; international financial flows; debt accumulation; trade integration; domestic currencies;

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References

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  1. Helene Rey & Pierre Olivier Gourinchas, 2005. "International Financial Adjustment," 2005 Meeting Papers, Society for Economic Dynamics 169, Society for Economic Dynamics.
  2. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," Trinity Economics Papers, Trinity College Dublin, Department of Economics 20014, Trinity College Dublin, Department of Economics.
  3. Faruqee, Hamid & Laxton, Douglas & Muir, Dirk & Pesenti, Paolo, 2008. "Would protectionism defuse global imbalances and spur economic activity? A scenario analysis," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 32(8), pages 2651-2689, August.
  4. Erceg, Christopher & Guerriei, Luca & Gust, Christopher, 2006. "SIGMA: A New Open Economy Model for Policy Analysis," MPRA Paper 813, University Library of Munich, Germany.
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  19. Chinn, Menzie David & Frankel, Jeffrey A., 2006. "Will the Euro Eventually Surpass the Dollar As Leading International Reserve Currency?," Santa Cruz Center for International Economics, Working Paper Series, Center for International Economics, UC Santa Cruz qt4hz4n9pb, Center for International Economics, UC Santa Cruz.
  20. Martin, Philippe & Rey, H., 2000. "Financial integration and asset returns," European Economic Review, Elsevier, Elsevier, vol. 44(7), pages 1327-1350, June.
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  23. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2004. "The performance of international portfolios," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 817, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Luigi Bonatti & Andrea Fracasso, 2013. "Origins and prospects of the Euro existential crisis," DEM Discussion Papers, Department of Economics and Management 2013/03, Department of Economics and Management.
  2. Philip R. Lane & Gian Maria Milesi Ferretti, 2011. "External Adjustment and the Global Crisis," NBER Working Papers 17352, National Bureau of Economic Research, Inc.
  3. Lane, Philip R., 2006. "The Swedish External Position and the Krona," Working Paper Series 200, Sveriges Riksbank (Central Bank of Sweden).
  4. Nicolas Coeurdacier & Robert Kollmann & Philippe Martin, 2009. "International portfolios with supply, demand and redistributive shocks," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
  5. Fritz Breuss & Werner Roeger & Jan in’t Veld, 2009. "Global impact of a shift in foreign reserves to euros," Empirica, Springer, Springer, vol. 36(1), pages 101-122, February.
  6. Ranaldo, Angelo, 2009. "Segmentation and time-of-day patterns in foreign exchange markets," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(12), pages 2199-2206, December.
  7. Nicolas Stoffels & Cédric Tille, 2007. "Why are Switzerland's foreign assets so low? The growing financial exposure of a small open economy," Staff Reports, Federal Reserve Bank of New York 283, Federal Reserve Bank of New York.
  8. Luigi Bonatti & Andrea Fracasso, 2013. "The German Model and the European Crisis," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(6), pages 1023-1039, November.
  9. International Monetary Fund, 2010. "European Financial Linkages," IMF Working Papers 10/295, International Monetary Fund.
  10. Traistaru-Siedschlag, Iulia, 2007. "Macroeconomic Adjustment in Ireland under the EMU," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), vol. 2007(1-Spring), pages 78-92.
  11. Guy Meredith, 2007. "Debt Dynamics and Global Imbalances," IMF Working Papers 07/4, International Monetary Fund.
  12. Philip R. Lane, 2008. "The Macroeconomics of Financial Integration: A European Perspective," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp265, IIIS.

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