The Eurozone Crisis: A Balance-of-Payments Problem or a Crisis Due to a Flawed Monetary Design?

Marc Lavoie

International Journal of Political Economy, 2015, vol. 44, issue 2, 157-160

Abstract: Both Sergio Cesaratto and I see several flaws in the setup of the common currency Eurozone, and we both understand, in a similar way, the functioning of a monetary economy. The only point of disagreement it seems to me is that Cesaratto insists that the Eurozone crisis is a balance-of-payments problem, tied to current account deficits and capital outflows. But whereas the continuous loss of foreign reserves must eventually lead to some painful adjustment, Eurozone countries can never run out of TARGET2 balances, which can take unlimited negative values, so that the evolution of the balance of payments cannot be the source of the crisis. My view, and Roberto Frenkel’s, is that investors perceived, in contrast to other central banks, that the European Central Bank by convention and by design would decline to act as the purchaser of last resort until it became too late, which explains the speculative attacks against the securities issued by the governments of the Eurozone periphery.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1080/08911916.2015.1060831 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Eurozone crisis: a balance-of-payment problem or a crisis due to a flawed monetary design? (2015)
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: https://EconPapers.repec.org/RePEc:mes:ijpoec:v:44:y:2015:i:2:p:157-160

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MIJP20

DOI: 10.1080/08911916.2015.1060831

Access Statistics for this article

More articles in International Journal of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().