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Author: Benedicta Marzinotto Publisher: ISBN: Category : Languages : en Pages : 31
Book Description
This paper explores the extent to which financial liberalization in the euro area had a differentiated impact on members' private consumption patterns and in turn on their current account positions as a function of who got indebted in the first place. Theoretically, it builds on an inter-temporal consumption model augmented with household heterogeneity. Low/middle income groups are impatient and credit-constrained, whilst high-income groups are patient and under no constraint. Increased access to credit in previously financially repressed countries implies a relaxation of collateral constraints specifically for low-income groups, who differently from high-income agents borrow to finance current consumption. It follows that financial liberalization is associated with deteriorating external positions there where initial levels of financial openness and inclusion are lowest and the share of the low/middle-income group largest.
Author: Benedicta Marzinotto Publisher: ISBN: Category : Languages : en Pages : 31
Book Description
This paper explores the extent to which financial liberalization in the euro area had a differentiated impact on members' private consumption patterns and in turn on their current account positions as a function of who got indebted in the first place. Theoretically, it builds on an inter-temporal consumption model augmented with household heterogeneity. Low/middle income groups are impatient and credit-constrained, whilst high-income groups are patient and under no constraint. Increased access to credit in previously financially repressed countries implies a relaxation of collateral constraints specifically for low-income groups, who differently from high-income agents borrow to finance current consumption. It follows that financial liberalization is associated with deteriorating external positions there where initial levels of financial openness and inclusion are lowest and the share of the low/middle-income group largest.
Author: Mr.Joong Kang Publisher: International Monetary Fund ISBN: 1475594275 Category : Business & Economics Languages : en Pages : 23
Book Description
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.
Author: Mr.Thierry Tressel Publisher: International Monetary Fund ISBN: 149837381X Category : Business & Economics Languages : en Pages : 34
Book Description
Imbalances within the euro area have been a defining feature of the crisis. This paper provides a critical analysis of the ongoing rebalancing of euro area “deficit economies” (Greece, Ireland, Portugal, and Spain) that accumulated large current account deficits and external liability positions in the run-up to the crisis. It shows that relative price adjustments have been proceeding gradually. Real effective exchange rates have depreciated by 10-25 percent, driven largely by reductions in unit labor costs due to labor shedding. While exports have typically rebounded, subdued demand accounts for much of the reduction in current account deficits. Hence, the current account balance of the euro area as a whole has shifted into surplus. Internal rebalancing has come with subdued activity—notably very high unemployment in the deficit economies—and made continued adjustment more difficult. To advance rebalancing further, the paper emphasizes the need for: (1) macroeconomic policies that support demand and bring inflation in line with the ECB’s medium-term price stability objective; (2) continued EMU reforms (banking union) to ensure proper financial intermediation; and (3) structural reforms in product and labor markets to improve productivity and support the reallocation of resources to tradable sectors.
Author: European Commission. Directorate-General for Economic and Financial Affairs Publisher: ISBN: Category : Budget Languages : en Pages : 140
Book Description
Investigates the nature and consequences of the relationship between external imbalances and public finances and focusses on the role that fiscal policy can play in addressing and correcting existing and emerging external imbalances in the context of the global financial crisis.
Author: Piyaporn Sodsriwiboon Publisher: International Monetary Fund ISBN: 1455201227 Category : Business & Economics Languages : en Pages : 51
Book Description
The paper examines the causes, consequences, and potential cures of the large current account deficits in the Southern Euro Area (SEA). These were mostly driven by a decline in private saving rates. But it was the European Monetary Union and the Euro, which enabled these countries to maintain investment rates, and thus run larger current account deficits, by improving their access to the international pool of saving. The paper finds that the deficits in SEA in 2008 were larger than can be explained by fundamentals, though the situation varies substantially across countries. It also finds that although the global financial crisis has started to force some unwinding, the current account deficits are expected to remain high in the medium run, though again with substantial variation across countries. The paper argues these large external deficits pose risks to the economy and therefore matter, even in a currency union, and discusses some policy options to reduce them.
Author: European Commission. Directorate-General for Economic and Financial Affairs Publisher: ISBN: 9789279150791 Category : Budget Languages : en Pages : 140
Book Description
Investigates the nature and consequences of the relationship between external imbalances and public finances and focusses on the role that fiscal policy can play in addressing and correcting existing and emerging external imbalances in the context of the global financial crisis.
Author: European Commission. Directorate-General for Economic and Financial Affairs Publisher: ISBN: Category : Balance of payments Languages : en Pages : 62
Book Description
On 14 February 2012, the European Commission presented its first Alert Mechanism Report (AMR) in accordance with the Regulation (EU) No. 1176/2011 on the prevention and correction of macroeconomic imbalances. The AMR serves as an initial screening device to identify Member States that warrant further in depth analysis into whether imbalances exist or risk emerging. According to Article 5 of Regulation No. 1176/2011, these country-specific ?in-depth reviews? should examine the nature, origin and severity of macroeconomic developments in the Member State concerned, which constitute, or could lead to, imbalances. On the basis of this analysis, the Commission concludes whether it considers that an imbalance exists or not, and if so whether it is excessive or not, and what type of follow-up it will recommend to the Council to address to the Member State. This in-depth review concludes that Cyprus is experiencing very serious macroeconomic imbalances, which are not excessive but need to be urgently addressed. In particular, macroeconomic developments as reflected in the current account, public finances and the financial sector require close monitoring and urgent economic policy attention in order to avert any adverse effects on the functioning of the economy and of economic and monetary union.
Author: Ansgar Hubertus Belke Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
In the debate on global imbalances, the euro area countries received increasing attention since the outbreak of the financial crisis. While the current account is on balance for the entire area, divergences between individual member states have increased since the introduction of the common currency and are part of the excessive imbalances procedure. This paper explores the determinants of the imbalances by using panel-econometric techniques. The analysis shows that a lack in competitiveness is the main explanation for the external deficits of the countries that are at the heart of the euro area debt crisis. As a deterioration of competitiveness is not feasible for the surplus countries, an asymmetric response is required to reduce the imbalances.
Author: Giancarlo Corsetti Publisher: International Monetary Fund ISBN: 1475516800 Category : Business & Economics Languages : en Pages : 49
Book Description
Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region and strongly procyclical fiscal policy at the aggregate level exacerbates the risk of belief-driven deflationary downturns. The model provides an argument in favor of coordinated, asymmetric fiscal stances as a way to prevent selffulfilling debt crises.
Author: Benedicta Marzinotto
Author: Benedicta Marzinotto
Author: Mr.Joong Kang
Author: Mr.Thierry Tressel
Author: European Commission. Directorate-General for Economic and Financial Affairs
Author: Piyaporn Sodsriwiboon
Author: Jeroen Hessel
Author: European Commission. Directorate-General for Economic and Financial Affairs
Author: European Commission. Directorate-General for Economic and Financial Affairs
Author: Ansgar Hubertus Belke
Author: Giancarlo Corsetti