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Current Account Imbalances in Europe

Philip Lane and Barbara Pels

No 8958, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The European crisis is partly attributable to the sharp increase in external imbalances across Europe during the pre-crisis period. We examine current account imbalances in Europe over 1995-2007, together with the underlying saving and investment rates (and their subcomponents). We find that the discrete expansion in current account imbalances during the 2002-2007 period can be attributed to a strengthening in the link between growth forecasts and current account balances. A striking pattern was that greater optimism about future growth was associated with lower savings and higher construction investment, rather than investment in productive capital.

Keywords: current account; EMU; Europe (search for similar items in EconPapers)
JEL-codes: E63 F41 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
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