Sanchez, J., Varoudakis, Ar., (2014), “Tracking the causes of Eurozone external imbalances: New evidence”, 6 February.
External imbalances within the Eurozone grew substantially between the introduction of the euro in 1999 and the global financial crisis of 2008–09. Using new empirical evidence, this column argues that imbalances in the Eurozone periphery were mainly driven by a domestic demand boom, triggered by greater financial integration, with changes in the periphery’s competitiveness playing only a minor role. Internal devaluation may thus have been of limited effectiveness in restoring external balances, although better external competitiveness may eventually boost medium-term growth.
Relevant Posts
- IMF (2012), ‘External Imbalances in the Euro Area’, European and Western Hemisphere Departments, IMF Working Papers, N. 12/36.
- Taylor, A., (2013), “External Imbalances and Financial Crises” , International Monetary Fund, IMF Working Paper No. 13/260, December.