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Current Account Balances and Structural Adjustment in the Euro Area

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  • Ansgar Belke

    ()

  • Holger Zemanek
  • Gunther Schnabl

Abstract

In the past decade, a set of euro area countries has accumulated large current account defi cits. After a brief relaxation of the euro area internal imbalances in the wake of the fi nancial crisis, it appears as if this pattern arises anew when times normalize again and Germany still sticks to export-led growth. This issue has been labelled one of the most challenging economic policy issues for Europe inter alia by the European Commission and some other players on the EU level. In this paper, we analyse the role of private restructuring and structural reforms for the urgently needed sustainable readjustment of intra-euro area current account balances. A panel regression reveals a signifi cant impact of structural reforms on intra-euro area current account balances. This implies that in particular structural reforms and wage restraint in notorious current account and budget defi cit countries such as Greece are highly suitable to support long-term economic stability in Europe.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0176.

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Length: 49 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:rwi:repape:0176

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Keywords: Structural reforms; current account balances; euro area; dynamic panel estimation; interaction term;

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Citations

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Cited by:
  1. Schnabl, Gunther & Zemanek, Holger, 2011. "Inter-Temporal Savings, Current Account Dynamics and Asymmetric Shocks in a Heterogeneous European Monetary Union," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48685, Verein für Socialpolitik / German Economic Association.
  2. Nicola Acocella, . "A tale of two cities: exit policies in Washington and Frankfurt," Working Papers 117/13, Sapienza University of Rome, Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF.
  3. Ansgar Belke & Christian Dreger, 2011. "Current Account Imbalances in the Euro Area: Catching up or Competitiveness?," Ruhr Economic Papers 0241, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Dionysios K. Solomos & Dimitrios N. Koumparoulis, 2012. "Discretionary Fiscal Policy in the EMU Context: An Empirical Approach (1981-2010) & the Recent Reform in European Governance," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 117-136.
  5. João Rebelo Barbosa & Rui Henrique Alves, 2011. "The Euro Area Ten Years after Its Creation: (Divergent) Competitiveness and the Optimum Currency Area Theory," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(5), pages 605-629, December.
  6. Harashima, Taiji, 2011. "A Mechanism of Inflation Differentials and Current Account Imbalances in the Euro Area," MPRA Paper 28121, University Library of Munich, Germany.
  7. João Rebelo Barbosa & Rui Henrique Alves, 2011. "Divergent competitiveness in the eurozone and the optimum currency area theory," FEP Working Papers 436, Universidade do Porto, Faculdade de Economia do Porto.
  8. Norén, Ronny, 2011. "Towards a more integrated, symmetric and viable EMU," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 821-830.
  9. S. Devrim Yilmaz & Burak Saltoglu, 2013. "Why is it so Difficult and Complex to Solve the Euro Problem?," Centre for Growth and Business Cycle Research Discussion Paper Series 180, Economics, The Univeristy of Manchester.
  10. Helge Berger & Volker Nitsch, 2010. "The Euro’s Effecton Trade Imbalances," IMF Working Papers 10/226, International Monetary Fund.
  11. Berger, Helge & Nitsch, Volker, 2014. "Wearing corset, losing shape: The euro's effect on trade imbalances," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 136-155.
  12. Schupp, Claudia & Wache, Benjamin, 2014. "Wie groß ist der Einfluss von deutschen Wirtschaftsforschungsinstituten? Ein Ranking anhand von RePEc-Daten
    [How large is the influence of German economic research institutes? A ranking analysis u
    ," MPRA Paper 55519, University Library of Munich, Germany.
  13. Amy K. Filipek & Till Schreiber, 2010. "The Stability and Growth Pact: Past Performance and Future Reforms," Working Papers 97, Department of Economics, College of William and Mary.
  14. Vogel, Lukas, 2012. "Structural reforms, fiscal consolidation and external rebalancing in monetary union: A model-based analysis," Economic Modelling, Elsevier, vol. 29(4), pages 1286-1298.
  15. Francesca Pancotto & Filippo Pericoli, 2011. "Till Labor Cost Do Us Part A Vecm Model of Unit Labor Cost Convergence in the Euro Area," Working Papers 14, Doctoral School of Economics, Sapienza University of Rome, revised 2011.

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