Current Account Imbalances in the Euro Area: Does Catching Up Explain the Development?

12 Pages Posted: 24 Jan 2013

See all articles by Ansgar Hubertus Belke

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration; IZA Institute of Labor Economics; Centre for European Policy Studies

Christian Dreger

European University Viadrina Frankfurt (Oder); IZA Institute of Labor Economics; Chinese Academy of Social Sciences (CASS)

Date Written: February 2013

Abstract

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.

Suggested Citation

Belke, Ansgar Hubertus and Dreger, Christian, Current Account Imbalances in the Euro Area: Does Catching Up Explain the Development? (February 2013). Review of International Economics, Vol. 21, Issue 1, pp. 6-17, 2013, Available at SSRN: https://ssrn.com/abstract=2206158 or http://dx.doi.org/10.1111/roie.12016

Ansgar Hubertus Belke (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for European Policy Studies ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

Christian Dreger

European University Viadrina Frankfurt (Oder) ( email )

Frankfurt (Oder)
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732
China

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