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Policy Coordination, Convergence, and the Rise and Crisis of EMU Imbalances

Author(s): Giuseppe Bertola

Policy Coordination, Convergence, and the Rise and Crisis of EMU Imbalances pdf(979 kB) Choose translations of the previous link 

Summary for non-specialistspdf(44 kB) Choose translations of the previous link 

If economic integration fosters expectations of institutional and productivity convergence, then international capital flows should be driven by consumption-smoothing anticipation of future income growth patterns as well as by factor-intensity equalization. In the euro area, financial market integration eased accumulation of international imbalances but does not appear to have resulted in the expected institutional convergence. The resulting crisis casts doubt on the sustainability not only of international imbalances, but also of the current configuration of the European integration process. A robust and coherent European market and policy integration process would require supranational implementation of the behavioral constraints and contingent redistribution schemes that traditionally operate within National socio-economic systems, and have been weakened in recent experience by uncoordinated policy competition.

(European Economy. Economic Papers 490. April 2013. Brussels. PDF. 68pp. Tab. Bibliogr. Free.)

KC-AI-13-490-EN-N (online)
ISBN 978-92-79-28572-1 (online)
doi: 10.2765/42965 (online)

JEL classification: E63, F36, F21, F42

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

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