Inter-Temporal Savings, Current Account Dynamics and Asymmetric Shocks in a Heterogeneous European Monetary Union
AbstractIn the current debate on the reasons and implications of the Greek and Irish euro crisis, the intra-European current account imbalances have gained rising attention. Whereas Greece and Ireland struggle for austerity in private and public spending, Germany is urged to reduce its current account surplus by increasing wages to forestall a new build-up of unsustainable intra-E(M)U indebtedness. We analyse the emergence of intra-European imbalances since the year 1990 based on the theory of optimum currency areas. We show that the asymmetric shock of the German unification can be seen not only as the origin of the 1992/93 crisis of the European Monetary System, but also for the rising intra-European current account imbalances since the euro introduction and thereby the current European debt crisis. Based on this finding we argue that an increase of German spending to reduce its current account surplus is not only in the interest of German taxpayers to contain financial risk, but would also impose austerity on the rest of Europe. The resulting new wave of crisis could trigger a new round of monetary expansion in the EMU. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis with number 48685.
Date of creation: 2011
Date of revision:
monetary union; German unification; asymmetric shock; current account imbalances; inter-temporal savings; financial crisis; euro crisis; European debt crisis; theory of optimum currency areas;
Other versions of this item:
- Gunther Schnabl & Holger Zemanek, 2010. "Inter-temporal Savings, Current Account Dynamics and Asymmetric Shocks in a Heterogeneous European Monetary Union," CESifo Working Paper Series 3279, CESifo Group Munich.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hoffmann, Andreas & Schnabl, Gunther, 2009.
"A Vicious Cycle of Manias, Crashes and Asymmetric Policy Responses - An Overinvestment View,"
18532, University Library of Munich, Germany.
- Andreas Hoffmann & Gunther Schnabl, 2011. "A Vicious Cycle of Manias, Crises and Asymmetric Policy Responses – An Overinvestment View," The World Economy, Wiley Blackwell, vol. 34(3), pages 382-403, 03.
- Andreas Hoffmann & Gunther Schnabl, 2009. "A Vicious Cycle of Manias, Crashes and Asymmetric Policy Responses - An Overinvestment View," CESifo Working Paper Series 2855, CESifo Group Munich.
- Ansgar Belke & Holger Zemanek & Gunther Schnabl, 2010.
"Current Account Balances and Structural Adjustment in the Euro Area,"
Ruhr Economic Papers
0176, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Holger Zemanek & Ansgar Belke & Gunther Schnabl, 2010. "Current account balances and structural adjustment in the euro area," International Economics and Economic Policy, Springer, vol. 7(1), pages 83-127, May.
- Corsetti, Giancarlo & Devereux, Michael P. & Hassler, John & Jenkinson, Tim & Saint-Paul, Gilles & Sinn, Hans-Werner & Sturm, Jan-Egbert & Vives, Xavier, 2009. "The financial crisis," Munich Reprints in Economics 20099, University of Munich, Department of Economics.
- Holger Zemanek, 2010. "Competitiveness Within The Euro Area: The Problem That Still Needs To Be Solved," Economic Affairs, Wiley Blackwell, vol. 30(3), pages 42-47, October.
- Joachim Ragnitz, 2010. "Strukturelle Ursachen des Einkommensrückstands Ostdeutschlands," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 17(02), pages 17-23, 04.
- Schnabl, Gunther & Freitag, Stephan, 2010. "Reverse causality in global current accounts," Working Paper Series 1208, European Central Bank.
- Karl Brenke, 2001. "Löhne in Ostdeutschland: Anpassung an das westdeutsche Niveau erst auf lange Sicht möglich," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 68(24), pages 357-364.
- Koedijk, Kees G & Kool, Clemens J M, 1992.
"Tail Estimates of East European Exchange Rates,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(1), pages 83-96, January.
- Ronald I. McKinnon, 2004. "Optimum Currency Areas and Key Currencies: Mundell I versus Mundell II," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 689-715, November.
- Gunther Schnabl, 2012. "Monetary Policy Reform in a World of Central Banks," Global Financial Markets Working Paper Series 26-2012, Friedrich-Schiller-University Jena.
- Schnabl, Gunther & Wollmershäuser, Timo, 2013.
"Fiscal Divergence and Current Account Imbalances in Europe,"
Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order
79899, Verein für Socialpolitik / German Economic Association.
- Gunther Schnabl & Timo Wollmershäuser, 2013. "Fiscal Divergence and Current Account Imbalances in Europe," CESifo Working Paper Series 4108, CESifo Group Munich.
- Schnabl, Gunther & Wollmershäuser, Timo, 2013. "Fiscal Divergence and Current Account Imbalances in Europe," Munich Reprints in Economics 19832, University of Munich, Department of Economics.
- Abad, José & Löffler, Axel & Schnabl, Gunther & Zemanek, Holger, 2012. "Fiscal divergence, current account and TARGET2 imbalances in the EMU," Working Papers 105, University of Leipzig, Faculty of Economics and Management Science.
- Gunther Schnabl & Stephan Freitag, 2012. "Determinants of Global and Intra-European Imbalances," Global Financial Markets Working Paper Series 25-2011, Friedrich-Schiller-University Jena.
- Gunther Schnabl, 2013. "The Macroeconomic Policy Challenges of Balance Sheet Recession: Lessons from Japan for the European Crisis," CESifo Working Paper Series 4249, CESifo Group Munich.
- 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.
- Gunther Schnabl & Stephan Freitag, 2012. "Reverse Causality in Global and Intra-European Imbalances," Review of International Economics, Wiley Blackwell, vol. 20(4), pages 674-690, 09.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.