“…This kind of dependence is a common feature in economic integrated areas such as the eurozone. Therefore it is highly convenient to take cross-section dependence into account in the analysis of the external imbalances as in Brissimis et al (2010Brissimis et al ( , 2013.…”
Section: Testing For External Sustainability: Empirical and Theoreticmentioning
Monetary integration, and more specifically, the creation of a monetary union in Europe, raises new economic questions concerning its functioning and governance. In particular, we focus on the implications of high and persistent current account deficits for the economic performance of monetary union members in the medium term. Recent literature has argued that conventional measures of external sustainability are misleading because they omit the effects of capital variations on net foreign asset positions due to, among others, stock or debt market crises. In this paper we revisit external sustainability making use of the database developed by Lane and Milesi-Ferretti (2007) that includes these "valuation effects". The sample period studied covers from the launching of the monetary integration process in Europe (the creation of the European Snake in 1972) up to 2011. Our econometric methodology accounts for the increasing cross-section dependence among EMU countries as well as for possible structural breaks endogenously determined. The results point to the need of abrupt adjustments, either led by the markets or promoted by pro-active policy measures, in order to offset external disequilibria. These results would give support to the surveillance measures proposed by the European Commission (2009, 2010a) and would reject the Lawson's doctrine of "laissez-faire".
“…This kind of dependence is a common feature in economic integrated areas such as the eurozone. Therefore it is highly convenient to take cross-section dependence into account in the analysis of the external imbalances as in Brissimis et al (2010Brissimis et al ( , 2013.…”
Section: Testing For External Sustainability: Empirical and Theoreticmentioning
Monetary integration, and more specifically, the creation of a monetary union in Europe, raises new economic questions concerning its functioning and governance. In particular, we focus on the implications of high and persistent current account deficits for the economic performance of monetary union members in the medium term. Recent literature has argued that conventional measures of external sustainability are misleading because they omit the effects of capital variations on net foreign asset positions due to, among others, stock or debt market crises. In this paper we revisit external sustainability making use of the database developed by Lane and Milesi-Ferretti (2007) that includes these "valuation effects". The sample period studied covers from the launching of the monetary integration process in Europe (the creation of the European Snake in 1972) up to 2011. Our econometric methodology accounts for the increasing cross-section dependence among EMU countries as well as for possible structural breaks endogenously determined. The results point to the need of abrupt adjustments, either led by the markets or promoted by pro-active policy measures, in order to offset external disequilibria. These results would give support to the surveillance measures proposed by the European Commission (2009, 2010a) and would reject the Lawson's doctrine of "laissez-faire".
“…At the same time, these expectations led households to increase their consumption spending, 10 manifested in the very low household saving ratios and the high annual growth rates in real consumer expenditure, through the period 2000-2008. In the 1990s, the savings ratio of the private sector recorded a considerable fall which largely reflected the decrease in the household savings ratio (and was to a large extent responsible for the savingsinvestment imbalances that were associated with a deterioration in the current account deficit, see Brissimis et al, 2010). Gross saving of the private sector fell from an average level of 24.6% of GDP in 1992-1996 to 14.5% in 1997-2001 and 12.0% in 8 The business loan rate referred to here is the rate on new loans with interest rate fixation period of less than one year and amounts of loan up to 1 million euro.…”
In this paper we empirically analyse the factors which determined consumer credit in Greece in the period before and after the financial liberalisation, while accounting for significant changes in structure due to the lifting of credit restrictions and the subsequent impressive boom of consumer loans. We use multivariate cointegration techniques to estimate a vector error correction model (VECM) and identify separate demand and supply relationships for consumer loans. We introduce demand and supply-related shifts in parameters through the inclusion of appropriate dummy variables and trends in the long-run relationships. We partly deviate from the typical Johansen procedure and estimate the model in two steps. We find that the theoretical exclusion and coefficient-size restrictions on the demand and supply cointegrating vectors are valid. Our results are consistent with the operation of a bank lending channel in Greece. We also find that the supply side was mostly responsible for the acceleration of consumer loan growth following credit liberalisation.JEL classification: E51;G21;O16;C32
“…8 According to the life-cycle hypothesis the young and the old are net consumers, while the working individuals are net savers. See also Brissimis et al (2010).…”
Section: Methodological Issues and Datamentioning
confidence: 99%
“…However, it affects the current account when financed though international capital inflows. This latter outcome appears to have 4 For a more detailed analysis of the model specification, see Brissimis et al (2010). 5 See, also, Roldos (1996) and Chinn and Prasad (2003).…”
Section: The Determining Factors Of the Current Accountmentioning
The purpose of this paper is to explore the main macroeconomic, financial and structural factors that influenced current account developments in the euro area
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