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International Financial Integration and the External Positions of Euro Area Countries

  • Philip R. Lane

This paper describes the dynamics of the external positions of euro area countries since the formation of EMU. While external imbalances have been the main focus in recent times, current account balances can only be properly interpreted in the context of understanding the overall international balance sheet and the dynamics of the net foreign asset. The creation of the euro represented a fundamental financial shock, whose effects then coincided with a reshaping of the international financial system through important financial innovations and the credit boom and securitization boom that followed. The paper builds a profile of the international balance sheets of euro area countries in order to understand the sources and implications of shifts in net positions over the last decade. It is also considers the gross scale of cross-border holdings. To understand the international risk distribution, the overall position is broken down between equity and debt components. The international currency exposures embedded in the international balance sheets are described. In relation to net flows and net positions, the paper tracks the distribution and persistence of current account balances and net foreign asset positions across the member countries. Furthermore, we document that other factors (such as valuation effects) have been important in the dynamics of the net foreign asset positions, in addition to the contribution made by the cumulative current account position. This working paper relates to the 2010 OECD Economic Survey of the Euro Area (www.oecd.org/eco/surveys/euroarea). L'intégration financière mondiale et les positions extérieures des pays de la zone euro Ce document décrit la dynamique des positions extérieures des pays de la zone euro depuis la formation de l’Union économique et monétaire. Alors que les déséquilibres externes ont été au centre des intérêts ces derniers temps, l’interprétation des soldes des opérations courantes ne peut se faire qu’à la lumière de la situation financière mondiale et de la dynamique des actifs nets extérieurs. La création de l’euro a représenté un choc financier fondamental, dont les effets ont alors coïncidé avec une réorganisation du système financier international à travers d’importantes innovations financières ainsi que de l’explosion du crédit et de l’envolée de la titrisation qui s’en ont suivies. Ce document établit un profil de la situation financière globale des pays de la zone euro afin de comprendre les origines et implications des positions nettes au cours de la dernière décennie. Il étudie également la forte ampleur des avoirs transnationaux. Pour comprendre la répartition internationale des risques, la situation globale est décomposée en avoirs et dettes. Les risques de change intégrés dans les bilans globaux y sont décrits. Le document retrace la répartition et la persistance des soldes courants et des positions nettes extérieures dans les différents pays membres, en lien avec les flux et positions nets. Par ailleurs, on montre qu’outre l’apport fourni par le cumul des soldes de la balance courante, les autres facteurs (tels que les effets de valorisation) ont été importants dans la dynamique des positions nettes extérieures. Ce document de travail se rapporte à l'Étude économique de la zone euro. (www.oecd.org/eco/etudes/zoneeuro).

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File URL: http://dx.doi.org/10.1787/5km33sqg0m9s-en
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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 830.

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Date of creation: 10 Dec 2010
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Handle: RePEc:oec:ecoaaa:830-en
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