A panel VAR analysis of macro-financial imbalances in the EU

We investigate the interactions across current account misalignments, real effective exchange rate misalignments and financial gaps within EU countries, applying a Bayesian panel Vector Autoregression to 27 members over period 1994–2012. find that, for euro area, reaction of shock in is largest. In non-euro area countries periphery an increase leads temporary lowering competitiveness thus amplifying fluctuations. For core, or expansion gap may help rebalancing account. central eastern european members, bring larger deficits medium-long run. Different policies should be applied different order reach balanced move close equilibrium level rate, given The directions transmissions are crucial defining right path towards they taken into