Current Account ‘Core–Periphery Dualism’ in the EMU

25 Pages Posted: 5 Oct 2016

See all articles by Roberta de Santis

Roberta de Santis

Italian National Institute of Statistics

Tatiana Cesaroni

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: October 2016


Current account (CA) dispersion within European Union (EU) Member States has been increasing progressively since the 1990s. Interestingly, the persistent deficits in many peripheral countries have not been accompanied by a significant growth process able to stimulate a log run rebalancing as neoclassical theory predicts. To shed light on the issue, this paper investigates the determinants of Eurozone CA imbalances, focusing on the role played by financial integration. The analysis considers two samples of 22 OECD and 15 EU countries, three time horizons corresponding to various steps in European integration, different control variables and several panel econometric methods. The results suggest that within the EU group of countries financial integration contributed to explain the CA deterioration in the peripheral countries especially in the post‐EMU period creating an asymmetric behaviour within the EMU. From a financial stability perspective, this ‘divergence’ could hinder the effectiveness of monetary policy. By reducing the apparent benefits of participating in the monetary union, it also raises the risk of a break‐up.

Suggested Citation

de Santis, Roberta and Cesaroni, Tatiana, Current Account ‘Core–Periphery Dualism’ in the EMU (October 2016). The World Economy, Vol. 39, Issue 10, pp. 1514-1538, 2016, Available at SSRN: or

Roberta De Santis (Contact Author)

Italian National Institute of Statistics ( email )

Via Cesare Balbo 16
00184 Rome, 0185

Tatiana Cesaroni

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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