The Euro Trade Imbalances and Growth Differentials: A Minsky-Kaleckian Approach

36 Pages Posted: 18 Dec 2015

See all articles by Giovanni Covi

Giovanni Covi

European Central Bank (ECB); University of Verona

Date Written: October 18, 2015


The aim of the paper is to understand the causes of the growth differential created between the Mediterranean and the Nordic economies since the creation of Euro. The Minsky’s financial instability hypothesis and the Kalecki’s five determinants of profits are used in the paper as interpretative tool in order to disentangle the sources of this growth divergence. In light of this analysis, the economic crisis in the Eurozone endogenously spreads in the economic system, and it is not, as many believe, the consequence of an exogenous shock. The two regions represent two different growth models, and this, in turn, makes a symmetric fiscal policy unsuccessful. Trade imbalances and the subsequent flow of profits differential is what has triggered and later exacerbated this divergent path. This emphasizes the necessity of a mechanism able to automatically counterbalance the persistent flows of profits from South to North. To this respect, a mechanism similar to the Keynes’s Clearing Union is proposed to offset this source of instability, i.e., an institution able to prevent the creation of imbalances as well as to restore convergence between the two blocks.

Keywords: Eurozone, Economic Growth, Trade Imbalances, Minsky, Kalecki, Clearing Union

Suggested Citation

Covi, Giovanni, The Euro Trade Imbalances and Growth Differentials: A Minsky-Kaleckian Approach (October 18, 2015). Available at SSRN: or

Giovanni Covi (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

University of Verona ( email )

Via dell'Artigliere, 8
Verona, 37129

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