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Current Account Imbalances in the Eurozone: Is Institutional Heterogeneity to Blame?

Läpple, Benjamin LU (2015) NEKN01 20152
Department of Economics
Abstract
Can differences in institutional quality explain current account imbalances in the Euro area? This paper emphasizes a link between current accounts and institutional quality based on a country study for Greece. Subsequently it tests the relationship for a homogeneous sample of 24 European countries over the period 1990 through 2013. Regression analysis indicates that institutional quality is crucial to understand the evolution of the current accounts. The relationship holds for both the Euro area and the EU, however it is starker for the former. In addition, we find that with the introduction of the euro the influence of institutional quality became stronger. Furthermore, our results hold for the intra-EU and total trade balances but not... (More)
Can differences in institutional quality explain current account imbalances in the Euro area? This paper emphasizes a link between current accounts and institutional quality based on a country study for Greece. Subsequently it tests the relationship for a homogeneous sample of 24 European countries over the period 1990 through 2013. Regression analysis indicates that institutional quality is crucial to understand the evolution of the current accounts. The relationship holds for both the Euro area and the EU, however it is starker for the former. In addition, we find that with the introduction of the euro the influence of institutional quality became stronger. Furthermore, our results hold for the intra-EU and total trade balances but not for the external trade balances. Finally, the findings support the argument for structural reforms and more efficient governance in order to avoid future imbalances of the same magnitude. Supranational institutions such as the ESM, closer scrutiny of national regulators and governments as well as the strengthening of the regulatory mandate of the ECB likely contribute to a more stable currency area. (Less)
Popular Abstract
Can differences in institutional quality explain current account imbalances in the Euro area? This paper emphasizes a link between current accounts and institutional quality based on a country study for Greece. Subsequently it tests the relationship for a homogeneous sample of 24 European countries over the period 1990 through 2013. Regression analysis indicates that institutional quality is crucial to understand the evolution of the current accounts. The relationship holds for both the Euro area and the EU, however it is starker for the former. In addition, we find that with the introduction of the euro the influence of institutional quality became stronger. Furthermore, our results hold for the intra-EU and total trade balances but not... (More)
Can differences in institutional quality explain current account imbalances in the Euro area? This paper emphasizes a link between current accounts and institutional quality based on a country study for Greece. Subsequently it tests the relationship for a homogeneous sample of 24 European countries over the period 1990 through 2013. Regression analysis indicates that institutional quality is crucial to understand the evolution of the current accounts. The relationship holds for both the Euro area and the EU, however it is starker for the former. In addition, we find that with the introduction of the euro the influence of institutional quality became stronger. Furthermore, our results hold for the intra-EU and total trade balances but not for the external trade balances. Finally, the findings support the argument for structural reforms and more efficient governance in order to avoid future imbalances of the same magnitude. Supranational institutions such as the ESM, closer scrutiny of national regulators and governments as well as the strengthening of the regulatory mandate of the ECB likely contribute to a more stable currency area. (Less)
Please use this url to cite or link to this publication:
author
Läpple, Benjamin LU
supervisor
organization
course
NEKN01 20152
year
type
H1 - Master's Degree (One Year)
subject
keywords
current account, institutional quality, structural reforms, Euro area, Panel Data
language
English
id
8163838
date added to LUP
2015-11-05 11:11:05
date last changed
2015-11-05 11:11:05
@misc{8163838,
  abstract     = {Can differences in institutional quality explain current account imbalances in the Euro area? This paper emphasizes a link between current accounts and institutional quality based on a country study for Greece. Subsequently it tests the relationship for a homogeneous sample of 24 European countries over the period 1990 through 2013. Regression analysis indicates that institutional quality is crucial to understand the evolution of the current accounts. The relationship holds for both the Euro area and the EU, however it is starker for the former. In addition, we find that with the introduction of the euro the influence of institutional quality became stronger. Furthermore, our results hold for the intra-EU and total trade balances but not for the external trade balances. Finally, the findings support the argument for structural reforms and more efficient governance in order to avoid future imbalances of the same magnitude. Supranational institutions such as the ESM, closer scrutiny of national regulators and governments as well as the strengthening of the regulatory mandate of the ECB likely contribute to a more stable currency area.},
  author       = {Läpple, Benjamin},
  keyword      = {current account,institutional quality,structural reforms,Euro area,Panel Data},
  language     = {eng},
  note         = {Student Paper},
  title        = {Current Account Imbalances in the Eurozone: Is Institutional Heterogeneity to Blame?},
  year         = {2015},
}