Current Account Imbalances and Financial Integration in the Euro Area

Birgit Schmitz and Juergen von Hagen ()

No 7262, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: While the current account of euro area as a whole has remained almost balanced in the past two decades, several member countries have sizeable deficits or surpluses. In this paper, we interpret these imbalances as indicators of net capital flows among the euro-area countries and show that these net flows follow differences in per-capita incomes. Our results show that the elasticity with respect to per-capita incomes of net capital flows between euro-area countries and the euro area has increased. This is not the case for net capital flows between non-euro area countries and the euro area, nor for euro-area countries and the rest of the world. We interpret this as evidence for increasing financial integration in the euro area. There is also some evidence suggesting that the introduction of the euro has lead to some financial diversion.

Keywords: Current Account Imbalances; European Monetary Union; Financial Integration (search for similar items in EconPapers)
JEL-codes: F21 F33 F34 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-opm
Date: 2009-04
View list of references View citations in EconPapers

Downloads: (external link)
http://www.cepr.org/pubs/dps/DP7262.asp (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:7262

Ordering information: This working paper can be ordered from
http://www.cepr.org/pubs/dps/DP7262.asp

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Series data maintained by ().