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How Macroeconomic Imbalances Interact? Evidence from a Panel VAR Analysis

Blaise Gnimassoun () and Valérie Mignon ()

Working Papers from CEPII research center

Abstract: This paper aims at investigating the interactions between three key macroeconomic imbalances, namely Global imbalances,current-account discrepancies (external imbalances), output gaps (internal imbalances), and exchange-rate misalignments. To this end, we rely on the estimation of a panel VAR model for a sample of 22 industrialized countries over the 1980-2011 period. Our findings show that macroeconomic imbalances strongly interact through a causal relationship. We evidence that 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, while 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.

Keywords: Global imbalances; current account; output gap; exchange-rate misalignments; panel VAR (search for similar items in EconPapers)
JEL-codes: F32 F31 C33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2013-12
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Related works:
Journal Article: HOW DO MACROECONOMIC IMBALANCES INTERACT? EVIDENCE FROM A PANEL VAR ANALYSIS (2016) Downloads
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
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