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

David Guerreiro

Economic Modelling, 2014, vol. 44, issue S1, S50-S56

Abstract: This paper is interested in linking formally external disequilibrium to the sovereign debt crisis which 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)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:44:y:2014:i:s1:p:s50-s56

DOI: 10.1016/j.econmod.2014.04.029

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