On the brink? Intra-euro area imbalances and the sustainability of foreign debt
Finn Körner and
No 109, Working Papers from University of Leipzig, Faculty of Economics and Management Science
In this paper we study the intra-euro area imbalances based on a dynamic general equilibrium model. We show that European financial integration and the introduction of the euro might have contributed to the development of imbalances. Interest rate convergence following EMU accession led to net foreign debt positions, which prove difficult to reverse. Simulation results for the euro area suggest that current account imbalances and foreign debt positions of today's crisis countries have significantly diverged from a sustainable path. Increasing investment in the EMU core and productivity in crisis countries may permit a return to sustainable foreign debt levels and correct macroeconomic imbalances in the euro area.
Keywords: current account imbalances; euro area; foreign debt; sustainability; general equilibrium model (search for similar items in EconPapers)
JEL-codes: E44 F32 F34 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: On the Brink? Intra-euro Area Imbalances and the Sustainability of Foreign Debt (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:leiwps:109
Access Statistics for this paper
More papers in Working Papers from University of Leipzig, Faculty of Economics and Management Science Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().