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Macroeconomic imbalances in the euro area: where do we stand?

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  • Pierluigi, Beatrice
  • Sondermann, David

Abstract

This occasional paper reviews the macroeconomic developments in the euro area countries over the past 20 years. It analyses the accumulation of macroeconomic imbalances in the first decade of the EMU and their unwinding during the second decade. It shows that while flow imbalances have been corrected to a large extent, stock imbalances persist. The presence of large stock imbalances implies that the adjustment process needs to continue in the years to come. Accordingly, this paper reviews the national responses so far and the importance of well-functioning national economic structures for facilitating the adjustment process within the EMU. It shows that national structural policies are able to stimulate the supply side of the economy, increase adjustment capacity and mitigate the adverse growth effects of high debt and deleveraging. Finally, it gives an overview of the European response to address macroeconomic imbalances, i.e. the establishment of the Macroeconomic Imbalance Procedure (MIP). The MIP has contributed to increasing the general attention given to macroeconomic imbalances in the euro area and to the critical role that structural reforms play in facilitating their adjustment. Looking forward, further steps would appear to be warranted in order to move from greater awareness towards stronger ownership and implementation of reforms. JEL Classification: E02, F45, O52

Suggested Citation

  • Pierluigi, Beatrice & Sondermann, David, 2018. "Macroeconomic imbalances in the euro area: where do we stand?," Occasional Paper Series 211, European Central Bank.
  • Handle: RePEc:ecb:ecbops:2018211
    Note: 591179
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    Cited by:

    1. repec:onb:oenbmp:y:2019:i:q1-q2/19:b:8 is not listed on IDEAS
    2. Sondermann, David & Consolo, Agostino & Gunnella, Vanessa & Koester, Gerrit & Lambrias, Kyriacos & Lopez-Garcia, Paloma & Nerlich, Carolin & Petroulakis, Filippos & Saiz, Lorena & Serafini, Roberta, 2019. "Economic structures 20 years into the euro," Occasional Paper Series 224, European Central Bank.
    3. Sondermann, David & Zorell, Nico, 2019. "A macroeconomic vulnerability model for the euro area," Working Paper Series 2306, European Central Bank.

    More about this item

    Keywords

    economic resilience; macroeconomic imbalance procedure; Monetary Union; stock and flow imbalances; structural reforms;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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