A1 - Blaise Gnimassoun
A1 - Valérie Mignon
TI - How Macroeconomic Imbalances Interact? Evidence from a Panel VAR Analysis
IS - 2013-42
T3 - Working Papers
KW - Global imbalances
KW - current account
KW - output gap
KW - exchange-rate misalignments
KW - panel VAR
N2 - This paper aims at investigating the interactions between three key macroeconomic imbalances, namely Global imbalances,current-account discrepancies (external imbalances), output gaps (internal imbalances), and exchange-rate misalignments. To this end, we rely on the estimation of a panel VAR model for a sample of 22 industrialized countries over the 1980-2011 period. Our findings show that macroeconomic imbalances strongly interact through a causal relationship. We evidence that if current-account disequilibria threaten the stability of the global economy, their origin can be found in internal imbalances and exchange-rate misalignments: positive output-gap shocks as well as currency overvaluation deepen current-account deficits. In addition, while variations in external imbalances mainly result from exchange-rate misalignments in the euro area, they are mostly explained by output gaps for non-eurozone members.
ER -