Trade deficits are caused by the balances between saving and investment and the effects of those balances on international flows of capital. Generally, there are three primary sources of the trade deficit: a decline in saving/GDP ratio; fluctuations in the business cycles; investment...

This paper considers the increase in current account imbalances in euro area countries since the early 1990s. While the euro area as a whole has remained relatively close to external balance, the current account balances of individual countries have diverged: Spain, Greece and Portugal ran large...