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The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics: Many Paths to the Same Endpoint

  • Joong Shik Kang
  • Jay C. Shambaugh

Explanations of the large current account deficits for the euro area periphery and the Baltics in the run up to the crisis revolve around two main factors: deteriorating export performance or demand driven booms. We add that there were important movements in transfers and net income balances. While export performance remained relatively stable in most countries, for some countries, when transfers declined, households and firms borrowed so as to maintain the same level of spending. This was part of a persistent failure to adjust to trade deficits, which, along with rising net income payments, led to growing current account deficits. All of these factors played varying roles in the development of current account deficits across these countries.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/169.

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Length: 23
Date of creation: 17 Jul 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/169
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  1. Nils Holinski & Clemens Kool & Joan Muysken, 2012. "Persistent macroeconomic imbalances in the Euro area: causes and consequences," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 1-20.
  2. Lane, Philip R. & Pels, Barbara, 2012. "Current Account Imbalances in Europe," CEPR Discussion Papers 8958, C.E.P.R. Discussion Papers.
  3. Ruben Atoyan & Jonathan F Manning & Jesmin Rahman, 2013. "Rebalancing; Evidence from Current Account Adjustment in Europe," IMF Working Papers 13/74, International Monetary Fund.
  4. Gaulier, G. & Vicard, V., 2012. "Évolution des déséquilibres courants dans la zone euro : choc de compétitivité ou choc de demande ?," Bulletin de la Banque de France, Banque de France, issue 189, pages 47-64.
  5. Anna Ivanova, 2012. "Current Account Imbalances: Can Structural Policies Make a Difference?," IMF Working Papers 12/61, International Monetary Fund.
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