Is the European debt crisis a mere balance of payments crisis?

David Guerreiro

No 118, FIW Working Paper series from FIW

Abstract: This paper is interested in linking formally external disequilibriums to the sovereign debt crisis the EMU is experiencing since 2009. Relying on the CHEER approach that connects the goods market to the capital market, we show that when a country belonging to a monetary union faces external disequilibrium relative to its main partner, the corresponding interest rate differential increases. Moreover, when these imbalances are persistent, it may trigger a balance of payments crisis. Our findings indicate that this phenomenon seems to be at play for the European countries under international assistance.

Keywords: balance of payments crisis; CHEER; debt crisis; external imbalances; Eurozone (search for similar items in EconPapers)
JEL-codes: F33 F34 G01 (search for similar items in EconPapers)
Pages: 20
Date: 2013-04
New Economics Papers: this item is included in nep-eec and nep-opm
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Journal Article: Is the European debt crisis a mere balance of payments crisis? (2014)
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