Money Overhang, Credit Overhang and Financial Imbalances in the Euro Area

19 Pages Posted: 26 Nov 2013

See all articles by Clemens J.M. Kool

Clemens J.M. Kool

Utrecht University - School of Economics

Erik de Regt

Maastricht University

Tom van Veen

Maastricht University - Department of Economics

Date Written: November 25, 2013

Abstract

This paper focuses on the relation between external imbalances and domestic money and credit growth in the euro area. We compute money and credit overhang both for the euro area as a whole and for individual member countries. Our results show that both aggregate money and credit overhang have trend-like increased since the early 2000s. The increase in money overhang has been rather evenly spread over the member states but the increase in credit overhang has been unevenly spread and has mainly occurred in the GIIP. We apply panel analysis to detect temporal patterns between the developments in money overhang, credit overhang and external indebtedness. Looking at the groups of GIPS countries in isolation, net debt flows do play a significant role to explain money and credit overhang.

JEL Classification: E500

Suggested Citation

Kool, Clemens J.M. and Regt, Erik de and van Veen, Tom, Money Overhang, Credit Overhang and Financial Imbalances in the Euro Area (November 25, 2013). CESifo Working Paper Series No. 4476. Available at SSRN: https://ssrn.com/abstract=2359398

Clemens J.M. Kool

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Erik de Regt

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Tom Van Veen (Contact Author)

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

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