On the Brink? Intra Euro-Area Imbalances and the Sustainability of Foreign Debt

Published with modifications as: Finn Marten Körner & Holger Zemanek, 2013. "On the Brink? Intra-euro Area Imbalances and the Sustainability of Foreign Debt," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 18-34, 02

This version: University of Leipzig Working Paper No. 109

38 Pages Posted: 22 Aug 2012 Last revised: 27 Dec 2016

See all articles by Finn Marten Körner

Finn Marten Körner

ZenTra - Center for Transnational Studies; Uniper SE

Holger Zemanek

University of Leipzig - Institute for Economic Policy

Date Written: July 30, 2012

Abstract

In this paper we study the intra-euro area imbalances based on a ynamic 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

JEL Classification: E44, F32, F34, G15

Suggested Citation

Körner, Finn Marten and Zemanek, Holger, On the Brink? Intra Euro-Area Imbalances and the Sustainability of Foreign Debt (July 30, 2012). Published with modifications as: Finn Marten Körner & Holger Zemanek, 2013. "On the Brink? Intra-euro Area Imbalances and the Sustainability of Foreign Debt," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 18-34, 02, This version: University of Leipzig Working Paper No. 109, Available at SSRN: https://ssrn.com/abstract=2133516 or http://dx.doi.org/10.2139/ssrn.2133516

Finn Marten Körner (Contact Author)

ZenTra - Center for Transnational Studies ( email )

Carl von Ossietzky University of Oldenburg
Ammerländer Heerstraße 138
Oldenburg, 26129
Germany

HOME PAGE: http://www.zen-tra.de

Uniper SE ( email )

E.ON-Platz 1
Düsseldorf, 40479
Germany

HOME PAGE: http://https://www.uniper.energy/

Holger Zemanek

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Strasse 12
Leipzig, 40109
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
82
Abstract Views
545
rank
357,072
PlumX Metrics