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Current Account Balances and Structural Adjustment in the Euro Area


Holger Zemanek


University of Leipzig - Institute for Economic Policy

Ansgar Hubertus Belke


University of Duisburg-Essen - Department of Economics; Institute for the Study of Labor (IZA)

Gunther Schnabl


University of Leipzig - Institute for Economic Policy; CESifo (Center for Economic Studies and Ifo Institute)

March 1, 2010

Ruhr Economic Paper No. 176

Abstract:     
In the past decade, a set of euro area countries has accumulated large current account deficits. After a brief relaxation of the euro area internal imbalances in the wake of the financial crisis, it appears as if this pattern arises anew when times normalize again and Germany still sticks to export-led growth. This issue has been labeled one of the most challenging economic policy issues for Europe inter alia by the European Commission and some other players on the EU level. In this paper, we analyze the role of private restructuring and structural reforms for the urgently needed sustainable readjustment of intra-euro area current account balances. A panel regression reveals a significant impact of structural reforms on intra-euro area current account balances. This implies that in particular structural reforms and wage restraint in notorious current account and budget deficit countries such as Greece are highly suitable to support long-term economic stability in Europe.

Number of Pages in PDF File: 51

Keywords: Structural reforms, current account balances, euro area, dynamic panel estimation, interaction term

JEL Classification: E24, F15, F16, F32

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Date posted: April 21, 2010  

Suggested Citation

Zemanek, Holger and Belke, Ansgar Hubertus and Schnabl, Gunther, Current Account Balances and Structural Adjustment in the Euro Area (March 1, 2010). Ruhr Economic Paper No. 176. Available at SSRN: http://ssrn.com/abstract=1593469 or http://dx.doi.org/10.2139/ssrn.1593469

Contact Information

Holger Zemanek
University of Leipzig - Institute for Economic Policy ( email )
Institute for Economic Policy
Grimmaische Strasse 12
Leipzig, 40109
Germany
Ansgar Hubertus Belke (Contact Author)
University of Duisburg-Essen - Department of Economics ( email )
Universitätsstraße 12
Essen, DE Northrhine-Westphalia 45117
Germany
+49 201 183 2277 (Phone)
+49 201 183 4181 (Fax)
HOME PAGE: http://www.uni-due.de/makrooekonomik/
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Gunther Schnabl
University of Leipzig - Institute for Economic Policy ( email )
Institute for Economic Policy
Grimmaische Straße 12
Leipzig, 04109
Germany
HOME PAGE: http://www.uni-leipzig.de/iwp
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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