Current Account Balances and Structural Adjustment in the Euro Area

Holger Zemanek, Ansgar Belke and Gunther Schnabl

No 176, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: In the past decade, a set of euro area countries has accumulated large current account deficits. After a brief relaxation of the euro area internal imbalances in the wake of the financial crisis, it appears as if this pattern arises anew when times normalize again and Germany still sticks to export-led growth. This issue has been labelled one of the most challenging economic policy issues for Europe inter alia by the European Commission and some other players on the EU level. In this paper, we analyse the role of private restructuring and structural reforms for the urgently needed sustainable readjustment of intra-euro area current account balances. A panel regression reveals a significant impact of structural reforms on intra-euro area current account balances. This implies that in particular structural reforms and wage restraint in notorious current account and budget deficit countries such as Greece are highly suitable to support long-term economic stability in Europe.

Keywords: Structural reforms; current account balances; euro area; dynamic panel estimation; interaction term (search for similar items in EconPapers)
JEL-codes: E24 F15 F16 F32 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (37)

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Journal Article: Current account balances and structural adjustment in the euro area (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:176

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