External imbalances in the eurozone

Macroeconomic volatility and external imbalances

This paper studies the impact of macroeconomic volatility/uncertainty on the accumulation of net foreign assets of a country. We first show that, in OECD economies over the period 1970-2012, increases in country specific macroeconomic volatility are, after controlling for wide array of factors, significantly associated with accumulation of net foreign assets. An increase in volatility (measured...

The Long Run Determinants of the US External Imbalances∗

This paper develops a tractable two-country model with life-cycle structure to investigate the interaction and the relative importance of productivity growth, demographic factors and fiscal policy in accounting for the evolution of the US external imbalances during the last three decades. The results suggest that (i) productivity growth differentials drive the directionality of capital flows in...

Restructuring the Eurozone

This paper suggests that there should be a realignment of the current Eurozone. There has been research to argue that the Eurozone does not fit the Optimum Currency Area (OCA) criteria. This might be a contributing factor to the current economic crisis in Europe. I propose, based on results from k-means data clustering, that the Eurozone be divided into three separate regions under the European...

Sovereign Credit Risk in the Eurozone

The roots of the Euro area crisis can be traced back to at least the summer of 2007. Although not picked up by the credit rating agencies until much later, the probability of default on sovereign debt increased in parallel with clear macroeconomic misalignments. These misalignments include recession-triggered budget deficits, bailout-motivated fiscal measures,1 as well as country-specific strat...

Examining Eurozone Divergence