Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

Does the current account improve or deteriorate following a monetary policy expansion? We examine this issue theoretically and empirically. We show that a standard open economy DSGE model predicts that the current account response to a monetary policy shock depends on the degree of economic...

The euro area crisis is often linked to the emergence of current account imbalances. As most of the deficit countries experienced pronounced credit booms at the same time that these imbalances were building up, this paper investigates the link between domestic credit developments and the current...

Large current account deficits, and the corresponding reliance on capital flows from abroad, can increase a country's vulnerability to periods of heightened risk and uncertainty. This paper develops a framework to evaluate such vulnerabilities. It highlights the central importance of two...

We estimate a panel VAR model for the euro area to quantitatively assess how the uneven recourse of national banking systems in the euro area to the ECB's unconventional refinancing operations that led to the accumulation of large TARGET2 balances, has contributed to the propagation of different...

The paper evaluates current account dynamics in countries with different exchange rate regimes within the EU. In this, the empirical analysis explicitly differentiates between countries with a flexible and a fixed exchange rate regime and members of a monetary union. In addition, we model the...

Since 1991, survey expectations of long-run output growth for the U.S. relative to the rest of the world exhibit a pattern strikingly similar to that of the U.S. current account, and thus also to global imbalances. We show that this finding can to a large extent be rationalized in a two-region...

This paper examines the investment behavior in debt securities across financial institutions with a particular focus on how they respond to price changes. For identification, we use security-level data from the German Microdatabase Securities Holdings Statistics. Our results suggest that banks...

German labor market reforms in the 1990s and 2000s are generally believed to have driven the large increase in the dispersion of current account balances in the Euro Area. We investigate this hypothesis quantitatively. We develop an open economy New Keynesian model with search and matching...