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Determinants of Global and Intra-European Imbalances

Author

Listed:
  • Gunther Schnabl

    (Institute for Economic Policy, University of Leipzig)

  • Stephan Freitag

    (Institute for Economic Policy, University of Leipzig)

Abstract

The paper discusses global current account imbalances in the context of an asymmetric world monetary system and asymmetric current account developments. It identifies the US and Germany as center countries with rising / high current account deficits (US) and surpluses (Germany). These are matched by current account surpluses of countries stabilizing their exchange rates against the dollar (dollar periphery) and current account deficits of countries stabilizing their exchange rate against the euro or members of the euro area (euro periphery). The paper finds that changes of world current account positions are closely linked to the monetary policy decision patterns both in the centers and peripheries. Whereas in the centers current account positions are affected by monetary policies, in the peripheries exchange rate stabilization cum sterilization matters. In specific, monetary expansion in the US as well as exchange rate stabilization and sterilization policies in the dollar periphery are found to have contributed to global imbalances.

Suggested Citation

  • Gunther Schnabl & Stephan Freitag, 2012. "Determinants of Global and Intra-European Imbalances," Global Financial Markets Working Paper Series 25-2011, Friedrich-Schiller-University Jena.
    • Handle: RePEc:hlj:hljwrp:25-2011
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    File URL: http://pubdb.wiwi.uni-jena.de/pdf/wp_hlj25-2011.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Georg Dettmann, 2014. "Determinants of Internal and External Imbalances within the Euro Area," Working Papers 01/2014, University of Verona, Department of Economics.
    2. Luigi Bonatti & Andrea Fracasso, 2012. "A Germans� dilemma: save the euro or preserve their socio-economic model," Department of Economics Working Papers 1207, Department of Economics, University of Trento, Italia.
    3. Gunther Schnabl, 2012. "Monetary Policy Reform in a World of Central Banks," Global Financial Markets Working Paper Series 26-2012, Friedrich-Schiller-University Jena.
    4. Schnabl Gunther, 2013. "Die japanischen Lehren für die europäische Krise," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 62(1), pages 3-22, April.

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    More about this item

    Keywords

    Global Imbalances; Intra-European Imbalances; Asymmetric Monetary Policies; Foreign Reserve Accumulation; Sterilization; Granger Causality Tests; Panel Regressions;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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