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Rebalancing

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Author Info

  • Ruben Atoyan
  • Jonathan F Manning
  • Jesmin Rahman

Abstract

After the 2003-2007 economic boom, European countries with large pre-crisis current account imbalances are undergoing adjustments. Countries are adjusting at different paces and ways reflecting the source and magnitude of imbalances, availability of financing, competitiveness of the tradable sector and external environment. While emerging European countries with large pre-crisis imbalances and a fixed exchange rate regime have seen sharp current account adjustments and a rebound in growth, adjustment in the euro zone periphery countries, which are also carrying a legacy of pre-crisis CA imbalances, has been gradual with difficulties bringing back growth. This paper is an empirical investigation of current account adjustment in Europe with a focus on these two groups, looking at contributions from cyclical and other factors, and seeking to draw policy conclusions.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/74.

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Length: 29
Date of creation: 22 Mar 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/74

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Related research

Keywords: Current account balances; Europe; Emerging markets; Current account deficits; Fiscal policy; Wage adjustments; capital inflows; foreign capital; capital flows; unemployment rate; exchange rate regime; capital outflows; domestic demand; income convergence; foreign capital inflows; real effective exchange rate; import demand; private capital inflows; trading partners; partner countries; exchange rate regimes; partner country; trade partners; closed economies; trade imbalances; floating exchange rate regime; consumer price index; export performance; foreign capital flows; real appreciation; private financing; export sector; capital flow reversal; trade flows; bilateral trade; tradable goods; exchange rate policy; export structure; export market; domestic consumption; balance of payments crisis; oil prices; open economy; income differentials; massive capital inflows; economic integration; monetary union;

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References

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  1. Herrmann, Sabine & Winkler, Adalbert, 2008. "Financial markets and the current account: emerging Europe versus emerging Asia," Discussion Paper Series 1: Economic Studies 2008,05, Deutsche Bundesbank, Research Centre.
  2. Jesmin Rahman, 2010. "Absorption Boom and Fiscal Stance," IMF Working Papers 10/97, International Monetary Fund.
  3. Jesmin Rahman, 2008. "Current Account Developments in New Member States of the European Union," IMF Working Papers 08/92, International Monetary Fund.
  4. Silvia Merler & Jean Pisani-Ferry, 2012. "Sudden Stops in the Euro Area," Review of Economics and Institutions, Università di Perugia, vol. 3(3).
  5. 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.
  6. Herrmann, Sabine & Winkler, Adalbert, 2009. "Real convergence, financial markets, and the current account - Emerging Europe versus emerging Asia," The North American Journal of Economics and Finance, Elsevier, vol. 20(2), pages 100-123, August.
  7. Anja Baum & Marcos Poplawski-Ribeiro & Anke Weber, 2012. "Fiscal Multipliers and the State of the Economy," IMF Working Papers 12/286, International Monetary Fund.
  8. Holger Zemanek & Ansgar Belke & Gunther Schnabl, 2009. "Current Account Imbalances and Structural Adjustment in the Euro Area: How to Rebalance Competitiveness," Discussion Papers of DIW Berlin 895, DIW Berlin, German Institute for Economic Research.
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Citations

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Cited by:
  1. Stefan Behrendt, 2014. "The Fiscal Compact and Current Account Patterns in Europe," Global Financial Markets Working Paper Series 2014-52, Friedrich-Schiller-University Jena.
  2. Yýlmaz Akyüz, 2014. "Crisis Mismanagement in The United States And Europe: Impact On Developing Countries And Longer-Term Consequences," Working Papers 2014/3, Turkish Economic Association.
  3. Angelini, Elena & Ca' Zorzi, Michele & Forster, Katrin, 2014. "External and macroeconomic adjustment in the larger euro area countries," Working Paper Series 1647, European Central Bank.
  4. Joong Shik Kang & Jay C. Shambaugh, 2013. "The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics," IMF Working Papers 13/169, International Monetary Fund.

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