How macroeconomic imbalances interact? Evidence from a panel VAR analysis
Blaise Gnimassoun () and
Valérie Mignon ()
No 2014-5, EconomiX Working Papers from University of Paris Nanterre, EconomiX
This paper aims at investigating the interactions between three key macroeconomic imbalances, namely 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)
Pages: 23 pages
New Economics Papers: this item is included in nep-eec and nep-opm
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Journal Article: HOW DO MACROECONOMIC IMBALANCES INTERACT? EVIDENCE FROM A PANEL VAR ANALYSIS (2016)
Working Paper: How Macroeconomic Imbalances Interact? Evidence from a Panel VAR Analysis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2014-5
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