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How to deal with macroeconomic imbalances?


  • Gros, Daniel


It is plainly apparent that now is the time to make adjustments to the severe macroeconomic imbalances created by the sudden stop in capital flows to the countries in the southern periphery of the eurozone. But crucial questions arise about how to correct the imbalances, how to share the burden of the adjustment and what is the role of the European institutions, foremost the European Central Bank (ECB), in this process. Against this background, this paper first identifies the macroeconomic imbalances, focusing on intra-euro area current account disequilibria and the role of competitiveness. It then assesses the role of the common monetary policy and the monetary transmission mechanisms in the build-up of the imbalances. Finally, it introduces the possible role of the ECB and the ESRB in the process of rebalancing and as potential sources of inconsistency.

Suggested Citation

  • Gros, Daniel, 2012. "How to deal with macroeconomic imbalances?," CEPS Papers 7479, Centre for European Policy Studies.
  • Handle: RePEc:eps:cepswp:7479

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    References listed on IDEAS

    1. Gros, Daniel & Alcidi, Cinzia, 2011. "Adjustment Difficulties and Debt Overhangs in the Eurozone Periphery," CEPS Papers 5525, Centre for European Policy Studies.
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    Cited by:

    1. Hughes Hallett, Andrew & Martinez Oliva, Juan Carlos, 2015. "The importance of trade and capital imbalances in the European debt crisis," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 229-252.

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