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Money Overhang, Credit Overhang and Financial Imbalances in the Euro Area

Author

Listed:
  • C.J.M. Kool
  • E. de Regt
  • T. van Veen

Abstract

This paper focusses on the relation between external imbalances and domestic money and credit growth in the euro area. We compute money and credit overhang both for the euro area as a whole and for individual member countries. Our results show that both aggregate money and credit overhang have trend-like increased since the early 2000s. The increase in money overhang has been rather evenly spread over the member states but the increase in credit overhang has been unevenly spread and has mainly occurred in the GIIP countries. We apply panel analysis to detect temporal patterns between the developments in money overhang, credit overhang and external indebtedness. Looking at the groups of GIPS countries in isolation, net debt flows do play a significant role to explain money and credit overhang.

Suggested Citation

  • C.J.M. Kool & E. de Regt & T. van Veen, 2014. "Money Overhang, Credit Overhang and Financial Imbalances in the Euro Area," Working Papers 14-04, Utrecht School of Economics.
    • Handle: RePEc:use:tkiwps:1404
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    References listed on IDEAS

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    Cited by:

    1. J. Liu & C.J.M. Kool, 2017. "Monetary dynamics in the euro area: a disaggregate panel approach," Working Papers 17-14, Utrecht School of Economics.
    2. Liu, Jingyang & Kool, Clemens J.M., 2018. "Money and credit overhang in the euro area," Economic Modelling, Elsevier, vol. 68(C), pages 622-633.
    3. Unger, Robert, 2017. "Asymmetric credit growth and current account imbalances in the euro area," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 435-451.

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    More about this item

    Keywords

    money growth; credit growth; current account; financial integration; foreign lending;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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