IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Financial Integration and EMU's External Imbalances in a Two-Country OLG Model

  • Karl Farmer

    ()

    (Karl-Franzens University of Graz)

The pronounced increase in external imbalances in the European Economic and Monetary Union (EMU) during the years running up to 2008 is traditionally explained by financial integration through the common currency. This paper examines in a one-good, two-country overlapping generations' model, with production, capital accumulation and public debt, the effects of financial integration on the net foreign asset positions of initially low-interest and high-interest rate EMU countries. We find that a lower savings rate and government expenditure quota, together with a higher capital production share in the latter can in fact be transformed into the observed external imbalances when interest rates converge.

If 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.

File URL: http://www-classic.uni-graz.at/vwlwww/forschung/RePEc/wpaper/2013-07.pdf
Download Restriction: no

Paper provided by University of Graz, Department of Economics in its series Graz Economics Papers with number 2013-07.

as
in new window

Length:
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:grz:wpaper:2013-07
Contact details of provider: Postal: University of Graz, Universitaetsstr. 15/F4, 8010 Graz, Austria
Phone: ++43 316 380-3440
Fax: ++43 316 380-9520, 9521
Web page: http://volkswirtschaftslehre.uni-graz.at/Email:


More information through EDIRC

Order Information: Web: http://www-classic.uni-graz.at/vwlwww/forschung/RePEc/

References listed on IDEAS
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.:

as in new window
  1. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g7287gghh is not listed on IDEAS
  2. Coeurdacier, Nicolas & Martin, Philippe, 2007. "The geography of asset trade and the euro: insiders and outsiders," CEPREMAP Working Papers (Docweb) 0701, CEPREMAP.
  3. Philip R. Lane, 2012. "The European Sovereign Debt Crisis," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 49-68, Summer.
  4. Karl Farmer, 2014. "Financial Integration and EMU’s External Imbalances in a Two-Country OLG Model," International Advances in Economic Research, International Atlantic Economic Society, vol. 20(1), pages 1-21, February.
  5. Pierre-Olivier Gourinchas & Olivier Jeanne, 2006. "The Elusive Gains from International Financial Integration," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 715-741.
  6. Campa, Jose Manuel & Gavilan, Angel, 2011. "Current accounts in the euro area: An intertemporal approach," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 205-228, February.
  7. Philip R. Lane & Gian Maria Milesi-Ferretti, 2008. "International Investment Patterns," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 538-549, August.
  8. Lane, Philip R. & Pels, Barbara, 2012. "Current Account Imbalances in Europe," CEPR Discussion Papers 8958, C.E.P.R. Discussion Papers.
  9. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 769-97, August.
  10. Roger E.A. Farmer, 2009. "Confidence, Crashes and Animal Spirits," NBER Working Papers 14846, National Bureau of Economic Research, Inc.
  11. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April.
  12. Gian-Maria Milesi-Ferretti & Philip R. Lane, 2010. "The Cross-Country Incidence of the Global Crisis," IMF Working Papers 10/171, International Monetary Fund.
  13. Francesco Caselli, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 535-568, 05.
  14. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Peydró, José-Luis, 2010. "What lies beneath the euro's effect on financial integration? Currency risk, legal harmonization, or trade?," Journal of International Economics, Elsevier, vol. 81(1), pages 75-88, May.
  15. Philip R. Lane, 2006. "The Real Effects of European Monetary Union," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 47-66, Fall.
  16. BAI, Chong-En & QIAN, Zhenjie, 2010. "The factor income distribution in China: 1978-2007," China Economic Review, Elsevier, vol. 21(4), pages 650-670, December.
  17. Jappelli, Tullio & Pagano, Marco, 1992. "Saving, Growth and Liquidity Constraints," CEPR Discussion Papers 662, C.E.P.R. Discussion Papers.
  18. Vasco Carvalho & Alberto Martin & Jaume Ventura, 2012. "Understanding bubbly episodes," Economics Working Papers 1301, Department of Economics and Business, Universitat Pompeu Fabra.
  19. Fagan, Gabriel & Gaspar, Vítor, 2008. "Macroeconomic adjustment to monetary union," Working Paper Series 0946, European Central Bank.
  20. repec:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g7287gghh is not listed on IDEAS
  21. Karl Farmer, 2006. "Reducing Public Debt under Dynamic Efficiency: Transitional Dynamics in Diamond's OLG Model," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(2), pages 195-208, June.
  22. Rankin, Neil, 1987. "Disequilibrium and the Welfare-Maximising Levels of Government Spending, Taxation and Debt," Economic Journal, Royal Economic Society, vol. 97(385), pages 65-85, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:grz:wpaper:2013-07. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael Scholz)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.