The evolution of debtor-creditor relationships within a monetary union: Trade imbalances, excess reserves and economic policy

Claudius Gräbner-Radkowitsch, Philipp Heimberger, Jakob Kapeller, Michael Landesmann and Bernhard Schütz

Structural Change and Economic Dynamics, 2022, vol. 62, issue C, 262-289

Abstract: This paper analyzes the emergence of internal debtor-creditor relationships within a monetary union. We develop a stock-flow consistent model consisting of three regions – North, South, and the Rest of the World (RoW) –, where North and South form a monetary union. We show how the simultaneous presence of investment booms, declining export performance and mercantilist policies within a monetary union can interact in order to create Minsky-type boom-bust cycles. Fiscal policy and a Eurozone lender of last resort can help sustain economic life under existing structural imbalances, but without eliminating the root causes of boom-bust patterns.

Keywords: Financial crisis; International imbalances; Currency union; Stock-flow consistent modeling (search for similar items in EconPapers)
JEL-codes: E12 F41 F45 G01 G18 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Working Paper: The evolution of debtor-creditor relationships within a monetary union: Trade imbalances, excess reserves and economic policy (2021)
Working Paper: The evolution of debtor-creditor relationships within a monetary union: Trade imbalances, excess reserves and economic policy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:62:y:2022:i:c:p:262-289

DOI: 10.1016/j.strueco.2022.05.004

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