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Bilateral Imbalances in Europe

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  • Helge Berger
  • Volker Nitsch

Abstract

This article examines the association between trade and financial linkages among 18 European countries. We find that, with the introduction of the euro, trade imbalances among euro area members widened considerably, even after allowing for permanent asymmetries in trade competitiveness within pairs of countries or in the overall trade competitiveness of individual countries. Moreover, there is a significant relationship between patterns of trade and bilateral financial linkages, especially within the euro area; a surplus of a country in a bilateral trade relationship is typically accompanied by a country's positive net financial position vis-à-vis the respective partner country. (JEL codes: F15, F16, F32, F36, F42) Copyright The Author 2012. Published by Oxford University Press on behalf of Ifo Institute, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press.

Suggested Citation

  • Helge Berger & Volker Nitsch, 2013. "Bilateral Imbalances in Europe ," CESifo Economic Studies, CESifo, vol. 59(3), pages 559-575, September.
  • Handle: RePEc:oup:cesifo:v:59:y:2013:i:3:p:559-575
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifs033
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    References listed on IDEAS

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    1. Rose, Andrew K., 2005. "One reason countries pay their debts: renegotiation and international trade," Journal of Development Economics, Elsevier, vol. 77(1), pages 189-206, June.
    2. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2012. "External adjustment and the global crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 252-265.
    3. Berger, Helge & Nitsch, Volker, 2008. "Zooming out: The trade effect of the euro in historical perspective," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1244-1260, December.
    4. International Monetary Fund, 2010. "European Financial Linkages; A New Look At Imbalances," IMF Working Papers 10/295, International Monetary Fund.
    5. Martinez, Jose Vicente & Sandleris, Guido, 2011. "Is it punishment? Sovereign defaults and the decline in trade," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 909-930, October.
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    Cited by:

    1. Sarah Meyer & Sieglinde Rosenberger, 2015. "Just a Shadow? The Role of Radical Right Parties in the Politicization of Immigration, 1995–2009," Politics and Governance, Cogitatio Press, vol. 3(2), pages 1-17.
    2. Berger, Helge & Nitsch, Volker, 2013. "On the persistence of trade imbalances: Evidence from Europe," Darmstadt Discussion Papers in Economics 217, Darmstadt University of Technology, Department of Law and Economics.
    3. Sergio Cesaratto, 2013. "The implications of TARGET2 in the European balance of payments crisis and beyond," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(3), pages 359-382.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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