CURRENT ACCOUNT “CORE-PERIPHERY DUALISM” IN THE EMU

The neoclassical and OCA theories predict that higher capital market openness, providing better risk sharing opportunities, should enable catching up and convergence among countries. However, starting from ‘90s, Current Account (CA) dispersions within European Union (EU) member States have been progressively increasing. To shed light on this issue this paper investigates whether financial integration played a role in determining the so called Eurozone CA “core-periphery dualism”. The analysis considers two samples of 22 OECD and 15 EU countries, three time horizons corresponding to various European integration steps, different control variables and several panel econometric methods. The results suggest that within OECD and EU groups, financial integration significantly contributed to explain CA dispersion. Moreover, financial integration seems to have negatively influenced the CA balance in the peripheral countries especially in the post EMU period.