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Blaise Gnimassoun () and Valérie Mignon ()

Macroeconomic Dynamics, 2016, vol. 20, issue 7, 1717-1741

Abstract: This paper investigates the interactions between three key macroeconomic imbalances, namely current-account discrepancies (external imbalances), output gaps (internal imbalances), and exchange-rate misalignments. We estimate a panel VAR model for a sample of 22 industrialized countries over the period 1980–2011. Our findings show that macroeconomic imbalances strongly interact through a causal relationship. If current-account disequilibria threaten the stability of the global economy, their origin can be found in internal imbalances and exchange-rate misalignments: positive output-gap shocks as well as currency overvaluation deepen current-account deficits. In addition, although variations in external imbalances mainly result from exchange-rate misalignments in the euro area, they are mostly explained by output gaps for non-eurozone members.

Date: 2016
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Working Paper: How do macroeconomic imbalances interact? Evidence from a panel VAR analysis (2015)
Working Paper: How macroeconomic imbalances interact? Evidence from a panel VAR analysis (2014) Downloads
Working Paper: How Macroeconomic Imbalances Interact? Evidence from a Panel VAR Analysis (2013) Downloads
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