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Policy Coordination, Convergence, and the Rise and Crisis of EMU Imbalances

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  • Giuseppe Bertola

Abstract

If economic integration fosters expectations of institutional and productivity convergence, then international capital flows should be driven by consumption-smoothing anticipation of future income growth patterns as well as by factor-intensity equalization. In the euro area, financial market integration eased accumulation of international imbalances but does not appear to have resulted in the expected institutional convergence. The resulting crisis casts doubt on the sustainability not only of international imbalances, but also of the current configuration of the European integration process. A robust and coherent European market and policy integration process would require supranational implementation of the behavioral constraints and contingent redistribution schemes that traditionally operate within National socio-economic systems, and have been weakened in recent experience by uncoordinated policy competition.

Suggested Citation

  • Giuseppe Bertola, 2013. "Policy Coordination, Convergence, and the Rise and Crisis of EMU Imbalances," European Economy - Economic Papers 2008 - 2015 490, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0490
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    Cited by:

    1. Donatella Baiardi & Claudio Morana, 2015. "Financial deepening and income distribution inequality in the euro area," CeRP Working Papers 153, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    2. Dolls, Mathias & Fuest, Clemens & Neumann, Dirk & Peichl, Andreas, 2013. "Fiscal integration in the eurozone: Economic effects of two key scenarios," ZEW Discussion Papers 13-106, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. repec:eee:ecmode:v:70:y:2018:i:c:p:40-55 is not listed on IDEAS
    4. Bertola, Giuseppe, 2016. "Labor policies and capital mobility in theory and in EMU," European Economic Review, Elsevier, vol. 87(C), pages 62-77.

    More about this item

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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