nep-eec New Economics Papers
on European Economics
Issue of 2016‒03‒23
eighteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. PIIGS in the Euro Area. An Empirical DSGE Model By Alice, Albonico; Alessia, Paccagnini; Patrizio, Tirelli
  2. Bank Lending, Collateral, and Credit Traps in a Monetary Union By Corbisiero, Giuseppe
  3. The United States dominates global investment banking: does it matter for Europe? By Charles Goodhart; Dirk Schoenmaker
  4. International housing markets, unconventional monetary policy and the zero lower bound By Huber, Florian; Punzi, Maria Teresa
  5. Networks in risk spillovers: a multivariate GARCH perspective By Monica Billio; Massimiliano Caporin; Lorenzo Frattarolo; Loriana Pelizzon
  6. Regularities and Discrepancies of Credit Default Swaps: a Data Science approach through Benford's Law By Marcel Ausloos; Rosella Castellano; Roy Cerqueti
  7. Euro area monetary and fiscal policy tracking design in the time-frequency domain By Crowley, Patrick M.; Hudgins, David
  8. The invisible hand of the government: "Moral suasion" during the European sovereign debt crisis By Steven Ongena; Alexander Popov; Neeltje Van Horen
  9. Growing like Spain: 1995-2007 By García-Santana, Manuel; Moral-Benito, Enrique; Pijoan-Mas, Josep; Ramos, Roberto
  10. Adjustment within the Euro Area: Is it all about competitiveness? By Gros, Daniel
  11. Euro area significant banks: main differences and recent performance By Emilia Bonaccorsi di Patti; Roberto Felici; Federico Maria Signoretti
  12. The EMU and the anchoring of inflation expectations? By Mayes David; Paloviita Maritta; Viren Matti
  13. Heterogeneous Fall in Productive Capacity in Italian Industry during the 2008-13 Double-Dip Recession By Andrea Locatelli; Libero Monteforte; Giordano Zevi
  14. Strong Sterling Pound and Weak European Currencies in the Crises: Evidence from Covered Interest Parity of Secured Rates By Shin-ichi Fukuda
  15. European Bank Resolution: Making it work! By Huertas, Thomas
  16. The tax burden on banks over the period 2006-2014 By Giacomo Ricotti; Marco Burroni; Vincenzo Cuciniello; Elena Padovani; Elena Pisano; Stefania Zotteri
  17. A European Unemployment Benefits Scheme: The rationale and the challenges ahead By Beblavý, Miroslav; Marconi, Gabriele; Maselli,Ilaria
  18. The Sustainability of External Imbalances in the European Periphery By Vassilis Monastiriotis; Cigdem Borke Tunali

  1. By: Alice, Albonico; Alessia, Paccagnini; Patrizio, Tirelli
    Abstract: We build up and estimate a two-region DSGE model of the Euro area, investigating the interactions between the peripheral countries (PIIGS) and the rest of EMU. Our main focus is on the 2008-2009 financial crisis and on the subsequent 2010-sovereign bond crisis. One striking result is that the two crises are characterized by demand shocks in the core Euro area countries, whereas region-specific permanent technology shocks explain most of output growth slowdown in the PIIGS countries. Our results suggest that the capital flows reversals caused important supply-side e¤ects in the Eurozone periphery.
    Keywords: PIIGS, Euro crisis, two-country DSGE, Bayesian estimation
    JEL: C11 C13 C32 E21 E32 E37
    Date: 2016–03–11
  2. By: Corbisiero, Giuseppe (Central Bank of Ireland)
    Abstract: This paper provides a theory to investigate the transmission of non-standard monetary policy to corporate lending in a monetary union where financial frictions limit firms’ access to external finance. The model incorporates a banking-sovereign nexus by assuming that sovereign default would generate a liquidity shock severely hitting domestic banks’ balance sheet. I find that this feature crucially impairs the transmission of monetary policy, generating asymmetric lending responses and the risk of contagion across economies. In particular I show that, in some circumstances, the liquidity injected into the risky country’s banks results in financing the sovereign rather than boosting lending, and sovereign risk in one country generates negative spillover effects on lending throughout the monetary union via the collateral channel. The model sheds light on the troubled transmission of the ECB’s policy measures to the economy of stressed countries during the euro sovereign debt crisis.
    Keywords: Bank Lending, Sovereign Risk, Monetary Policy, Crisis, Euro Area
    JEL: E44 E52 F36 G01 G33
    Date: 2016–03
  3. By: Charles Goodhart; Dirk Schoenmaker
    Abstract: Highlights For the full references and the annex, please see the PDF version of this publication. In the aftermath of the global financial crisis, the market share of US investment banks is increasing, while that of their European counterparts is declining. We present evidence that US investment banks are on the verge of taking over pole position in European investment banking. Meanwhile, since 2015, Chinese investment banks have overtaken American and European investment banks in the Asia-Pacific market. Credit rating agencies and investment banks are the gatekeepers of the capital markets. The European supervisory institutions can effectively supervise the European operations of these US-managed players. On the political side, we suggest that the European Commission should continue to view its, albeit declining, banking industry as a strategic sector. The Commission, the European Central Bank and the Bank of England should jointly develop a strategic agenda for the EU-US Regulatory Dialogue. Finally, corporates rely on investment banks to issue new securities. We recommend that the big European corporates should cherish the (few) remaining European investment banks, by giving them at least one place in otherwise US- dominated banking syndicates. That could help to avoid complete dependence on US investment banks. 1. Introduction Europe’s banks are in retreat from playing a global investment banking role. This should not be a surprise. It is an, often intended, consequence of the regulatory impositions of recent years, notably of the ring-fencing requirements of the Vickers Report (2011) and the ban on proprietary trading by Liikanen (2012), but also including the enhanced capital requirements on trading books and other measures. The main concern is that a medium-sized European country, such as the United Kingdom or Switzerland, or even a larger country like Germany, let alone a tiny country like Iceland or Ireland, would find a global investment bank to be too large and too dangerous to support, should it get into trouble1. So, one of the intentions of the new set of regulations was to rein back the scale of European investment banking to a more supportable level. The European Union, of course, has a much larger scale than its individual member countries. If the key issue is the relative scale of the global (investment) bank and state that might have to support it, could a Europe-based global investment bank be possible2? We doubt it, primarily because the EU is not a state. It does not have sufficient fiscal competence. Even with the European banking union and European Stability Mechanism, the limits to the mutualisation of losses, eg via deposit insurance, mean that the bulk of the losses would still fall on the home country (Pisani-Ferry and Wolff, 2012). Moreover, there would be intense rivalry over which country should be its home country, and concerns about state aid and the establishment of a monopolistic institution. While the further unification of the euro area might, in due course, allow a Europe-based global investment bank to emerge endogenously, we do not expect it over the next half-decade or so. So the withdrawal of European banks from a global investment banking role is likely to continue. That will leave the five US ‘bulge-bracket’ banks, (Goldman Sachs, Morgan Stanley, JP Morgan, Citigroup and Bank of America Merrill Lynch) as the sole global investment banks left standing. The most likely result is a four-tier investment banking system. The first tier will consist of these five US global giants. The second tier will consist of strong regional players, such as Deutsche Bank, Barclays and Rothschild in Europe and CITIC in the Asia-Pacific region. HSBC is in between, with both European and Asia-Pacific roots. The third tier consists of the national banks’ investment banking arms. They will service (most of) the investment banking needs of their own corporates and public sector bodies, except in the case of the very biggest and most international institutions (which will want global support from the US banks) or in cases of complex, specialist advice. Examples of this third tier are Australian and Canadian banks, which support their own corporates and public sector bodies without extending into global investment banking. The fourth tier consists of small, specialist, advisory and wealth management boutiques. Why should it matter if in all the European countries, the local banks’ investment banking activities should retrench to this more limited local role? After all, there are few claims that Australia and Canada have somehow lost out by not participating in global investment banking. We review the arguments in section 4. Before doing so, we take a closer look at the investment banking market in Europe. Section 2 investigates the development of the relative market shares of US and European investment banks over time. It appears that the US investment banks are about to surpass their European counterparts in the European investment banking market.
    Date: 2016–03
  4. By: Huber, Florian; Punzi, Maria Teresa
    Abstract: In this paper we propose a time-varying parameter VAR model for the housing market in the United States, the United Kingdom, Japan and the Euro Area. For these four economies, we answer the following research questions: (i) How can we evaluate the stance of monetary policy when the policy rate hits the zero lower bound? (ii) Can developments in the housing market still be explained by policy measures adopted by central banks? (iii) Did central banks succeed in mitigating the detrimental impact of the financial crisis on selected housing variables? We analyze the relationship between unconventional monetary policy and the housing markets by using the shadow interest rate estimated by Krippner (2013b). Our findings suggest that the monetary policy transmission mechanism to the housing market has not changed with the implementation of quantitative easing or forward guidance, and central banks can affect the composition of an investor's portfolio through investment in housing. A counterfactual exercise provides some evidence that unconventional monetary policy has been particularly successful in dampening the consequences of the financial crisis on housing markets in the United States, while the effects are more muted in the other countries considered in this study.
    Keywords: Zero Lower Bound,Shadow interest rate,Housing Market,Time-varying parameter VAR
    JEL: C32 E23 E32
    Date: 2016
  5. By: Monica Billio (Department of Economics, University Of Venice Cà Foscari); Massimiliano Caporin (Department of Economics, University Of Padova); Lorenzo Frattarolo (SAFE-Goethe University Frankfurt); Loriana Pelizzon (SAFE-Goethe University Frankfurt)
    Abstract: We propose a spatial approach for modeling risk spillovers using financial time-varying proximity matrices based on observable networks. We show how these methods could be useful in (i) isolating risk channels, risk spreaders and risk receivers, (ii) investigating the role of portfolio composition in risk transfer, and (iii) computing target exposure structures able to reduce the forecasted system variance and thus the risk of the system. Our empirical analysis builds on banks’ foreign exposures provided by the Bank of International Settlements (BIS) as a proxy for Euro area cross-country holdings. We find, in the European sovereign bond markets, that Germany, Italy and, to a lesser extent, Greece are playing a central role in spreading risk, and Ireland and Spain are the most susceptible receivers of spillover effects that can be traced back to a physical claim channel: banks’ foreign exposures. We additionally show that acting on these physical channels before the sovereign crisis, it would have been possible to have a clear risk mitigation outcome
    Keywords: spatial GARCH, network, risk spillover, financial spillover
    JEL: C58 G10
    Date: 2016
  6. By: Marcel Ausloos; Rosella Castellano; Roy Cerqueti
    Abstract: In this paper, we search whether the Benford's law is applicable to monitor daily changes in sovereign Credit Default Swaps (CDS) quotes, which are acknowledged to be complex systems of economic content. This test is of paramount importance since the CDS of a country proxy its health and probability to default, being associated to an insurance against the event of its default. We fit the Benford's law to the daily changes in sovereign CDS spreads for 13 European countries, - both inside and outside the European Union and European Monetary Union. Two different tenors for the sovereign CDS contracts are considered: 5 yrs and 10 yrs, - the former being the reference and most liquid one. The time period under investigation is 2008-2015 which includes the period of distress caused by the European sovereign debt crisis. Moreover, (i) an analysis over relevant sub-periods is carried out, (ii) several insights are provided also by implementing the tracking of the Benford's law over moving windows. The main test for checking the conformance to Benford's law is - as usual - the $\chi^{2}$ test, whose values are presented and discussed for all cases. The analysis is further completed by elaborations based on Chebyshev's distance and Kullback and Leibler's divergence. The results highlight differences by countries and tenors. In particular, these results suggest that liquidity seems to be associated to higher levels of distortion. Greece - representing a peculiar case - shows a very different path with respect to the other European countries.
    Date: 2016–03
  7. By: Crowley, Patrick M.; Hudgins, David
    Abstract: This paper first applies the MODWT (Maximal Overlap Discrete Wavelet Transform) to Euro Area quarterly GDP data from 1995 – 2014 to obtain the underlying cyclical structure of the GDP components. We then design optimal fiscal and monetary policy within a large state-space LQ-tracking wavelet decomposition model. Our study builds a MATLAB program that simulates optimal policy thrusts at each frequency range where: (1) both fiscal and monetary policy are emphasized, (2) only fiscal policy is relatively active, and (3) when only monetary policy is relatively active. The results show that the monetary authorities should utilize a strategy that influences the short-term market interest rate to undulate based on the cyclical wavelet decomposition in order to compute the optimal timing and levels for the aggregate interest rate adjustments. We also find that modest emphasis on active interest rate movements can alleviate much of the volatility in optimal government spending, while rendering similarly favorable levels of aggregate consumption and investment. This research is the first to construct joint fiscal and monetary policies in an applied optimal control model based on the short and long cyclical lag structures obtained from wavelet analysis.
    Keywords: discrete wavelet analysis, euro area, fiscal policy, LQ tracking, monetary policy, optimal control
    JEL: C49 C61 C63 C88 E52 E61
    Date: 2015–08–12
  8. By: Steven Ongena; Alexander Popov; Neeltje Van Horen
    Abstract: Using proprietary data on banks' monthly securities holdings, we find that during the European sovereign debt crisis, domestic banks in fiscally stressed countries were considerably more likely than foreign banks to increase their holdings of domestic sovereign bonds in months with relatively high domestic sovereign bond issuance. This effect is stronger for state-owned banks and for banks with low initial holdings of domestic sovereign bonds, and it is not fuelled by Central Bank liquidity provision. Our results point to a "moral suasion" mechanism, and they are not driven by concurrent risk-shifting, carry-trading, regulatory compliance, or shocks to investment opportunities.
    Keywords: Sovereign debt; sovereign-bank loop; moral suasion
    JEL: F34 G21 H63
    Date: 2016–03
  9. By: García-Santana, Manuel; Moral-Benito, Enrique; Pijoan-Mas, Josep; Ramos, Roberto
    Abstract: Spanish GDP grew at an average rate of 3.5% per year during the expansion of 1995-2007, well above the EU average of 2.2%. However, this growth was based on factor accumulation rather than productivity gains as TFP fell at an annual rate of 0.7%. Using firm-level administrative data for all sectors we show that deterioration in the allocative efficiency of productive factors across firms was at the root of the low TFP growth in Spain, while misallocation across sectors played only a minor role. Cross-industry variation reveals that the increase in misallocation was more severe in sectors where government influence is more important for business success, which represents novel evidence on the potential macroeconomic costs of crony capitalism. In contrast, sectoral differences in financial dependence, skill intensity, innovative content, tradability, or capital structures intensity appear to be unrelated to changes in allocative efficiency. All in all, the observed high output growth together with increasing firm-level misallocation in all sectors is consistent with an expansion driven by a demand boom rather than by structural reforms.
    Keywords: Misallocation; Spain; TFP
    JEL: D24 O11 O47
    Date: 2016–03
  10. By: Gros, Daniel
    Abstract: The key problem afflicting the eurozone today seems clear: the periphery experienced a large loss of competitiveness during the boom years. In order for these economies to recover, they must restore their competitiveness, ideally by increasing productivity. This contribution shows, however, that the story line is not that straightforward. The drivers of competitiveness might have been more macro than micro in nature. The relationship between productivity and competitiveness is sometimes the opposite of what one would expect; and the link between competitiveness and exports is also much weaker than generally believed. Daniel Gros is Director of CEPS. An earlier version of this paper was prepared for the 14th Munich Economic Summit on “Competitiveness and Innovation: The Quest for Best", co-organised by CESifo and the BMW Foundation Herbert Quandt, 21-22 May 2015, and published in CESifo Forum, Vol. 16 (3):18-25 ( He gratefully acknowledges useful comments and suggestions received from Stefano Micossi, who recently completed a related contribution to the “Rebooting Europe – Step 2” project organised by the Centre for Economic Policy Research (CEPR). CEPS has published this latter paper on its website as a companion piece to the present study (see “Balance-of-Payments Adjustment in the Eurozone”, CEPS Policy Brief No. 38, January 2016).
    Date: 2016–01
  11. By: Emilia Bonaccorsi di Patti (Banca d'Italia); Roberto Felici (Banca d'Italia); Federico Maria Signoretti (Banca d'Italia)
    Abstract: Based on publicly available data we propose a simple taxonomy of the banks under the direct supervision of the ECB, taking into account their core business, size, and degree of internationalization. We compare the structures of the balance sheet and income statement of the eight different types of bank, and analyse their profitability between 2006 and 2013. The majority of banks are lending-oriented, exposed to their domestic market, with high credit risk exposure to nonfinancial firms and retail clients. The ratio of risk-weighted assets to total assets differs significantly across bank types, even controlling for the composition of credit risk exposures; this heterogeneity mostly reflects country-specific riskiness and the extent to which banks in each category use their internal models to determine capital requirements. Since 2010, the profitability of lending-oriented banks has declined more sharply than that of the other banks, reflecting both poorer macroeconomic conditions in countries where many of these banks are located, and a higher sensitivity of ROA to GDP growth.
    Keywords: euro area banks, significant banks, business model, bank profitability
    JEL: G21
    Date: 2016–01
  12. By: Mayes David (Auckland University); Paloviita Maritta (Bank of Finland); Viren Matti (Bank of Finland and Department of Economics, University of Turku)
    Abstract: It has been argued that one advantage of EMU in the EU has been an improvement in the credibility of monetary policy. This paper provides a new way of assessing the credibility of monetary policy by analyzing the dispersion of inflation–unemployment observations over time. In this way, we may reveal whether the short run Phillips curves have shifted due to changes in inflation expectations. This way of analyzing the anchoring of inflation expectations is both simple and free from ambiguities that are related to the choice of the Phillips curve specification and modelling of inflation expectations. The analysis uses data from eleven EMU countries and nine non-EMU countries that are used as points of comparison. The sample periods are 1984-1998 and 1999-2013. The analysis is based on dispersion measures where we use alternative weights for inflation and unemployment and also on a simple Misery index which is just a sum of inflation and unemployment values. The general outcome of the paper is that dispersion (and the Misery index) has decreased during the EMU period. The decrease has, however, been smaller than in control group countries. This implies that while the credibility of monetary policy may have increased under EMU, this just mirrors the general experience in the OECD over the same period.
    Keywords: Misery-index, inflation, unemployment, Phillips curve
    JEL: E31 E61
    Date: 2015–12
  13. By: Andrea Locatelli (Bank of Italy); Libero Monteforte (Bank of Italy); Giordano Zevi (Bank of Italy)
    Abstract: Between 2008 and 2013 productive capacity was considerably downsized in the Italian manufacturing sector. This paper analyses the micro-data collected for the Bank of Italy surveys to identify the main drivers of the reduction in the whole 2008-13 period and in four sub-periods (pre-crisis 2001-07, first phase of the crisis 2008-09, recovery 2010-11, and second crisis 2012-13). Our main findings are that i) losses of productive capacity varied widely across manufacturing sub-sectors with differences in pre-crisis trends tending to persist in a few sub-sectors during the double-dip recession; ii) large firms were more successful in avoiding major capacity losses, especially in the first phase of the crisis; iii) the share of sales on foreign markets was negatively correlated with performance in 2008-09, but the correlation turned positive in 2012-13; iv) among the Italian macro-regions, the Centre weathered the long recession better; v) subsidiaries underperformed firms not belonging to any group; and vi) the negative effects on productive capacity of credit constraints, which discouraged investments, were felt by Italian firms particularly in 2012-13.
    Keywords: productive capacity, manufacturing, microdata
    JEL: E32 L16 L60
  14. By: Shin-ichi Fukuda
    Abstract: In the post Lehman period, the interest rate of the US dollar became low on the forward contract because of“flight to quality” to the international currency. However, in the Euro crisis, that of the Sterling pound became equally low, while the other European currencies such as the Danish kroner increased its liquidity premium. By using secured rates, the following analysis examines why the Sterling pound and the Danish kroner showed asymmetric features in deviations from the covered interest parity (CIP) condition. The regression results suggest that there was a structural break in the determinants of the deviations across the European currencies in the two crises. Currency-specific money market risk was critical in explaining the deviations in the global financial crisis (GFC), while EU banks’ credit risk and market risk were useful in explaining the deviations in the Euro crisis. In particular, EU banks’ credit risk and market risk had asymmetric effect on the deviations. The asymmetry explains different features between the Sterling pound and the Danish kroner.
    JEL: F36 G12 G15
    Date: 2016–01
  15. By: Huertas, Thomas
    Abstract: From the start of 2016, new rules for bank resolution are in place – as spelled out in the Bank Recovery and Resolution Directive (BRRD) – across the EU, and a new authority (the Single Resolution Board, or SRB) is fully operational for resolving all banks in the eurozone. The implementation issues of the new regime are enormous. Banks need to develop recovery plans, and authorities need to create resolution plans as well as set the minimum required amount of own funds and eligible liabilities (MREL) for each bank. But given the diversity in bank structures and instruments at EU and global level, this will be a formidable challenge, above all with respect to internationally active banks. In order to explore ways in which the authorities and banks can meet this challenge, CEPS formed a Task Force composed of senior experts on banking sector reform and chaired by Thomas Huertas, Partner and Chair, EY Global Regulatory Network. This report contains its policy recommendations.
    Date: 2016–01
  16. By: Giacomo Ricotti; Marco Burroni (Banca d'Italia); Vincenzo Cuciniello (Banca d'Italia); Elena Padovani (Banca d'Italia); Elena Pisano (Banca d'Italia); Stefania Zotteri (Banca d'Italia)
    Abstract: Following the establishment of the Single Supervisory Mechanism (SSM), concerns about having a level playing field become more important due to the heterogeneity in bank taxation rules across Europe: measuring the tax burden can provide a first rough measure of the extent of heterogeneity across countries. After a review of the main differences in banks taxation between Italy, France, Germany, Spain and the UK, the paper provides estimates for the tax burden and deferred tax assets in these countries over the years 2006-2014; the impact of differences in taxation on bank profitability is also examined. Moreover, the paper carries out a more in-depth analysis of Italian banks by considering both individual balance sheet data and aggregate tax return data. The impact of tax measures on financial stability and on profitability is further analysed. The comparative analysis points to a wide heterogeneity across countries in the tax treatment of the banking sector. This suggests that it would be advantageous to explore possible ways to make the tax systems of the countries participating in the SSM more homogeneous; a first step could be to harmonize tax bases.
    Keywords: banking, taxation
    JEL: G21 H25 H87 K34
    Date: 2016–02
  17. By: Beblavý, Miroslav; Marconi, Gabriele; Maselli,Ilaria
    Abstract: This paper aims to frame the debate on a European Unemployment Benefits Scheme (EUBS), as a shock absorber for EU economies, around its origins on the one hand, and its most controversial aspects, on the other. The paper focuses on several key aspects of the EUBS, the first being the options for financing the scheme. This can be divided into those requiring the imposition of an ad-hoc tax in member countries and those relying on general contributions from these countries, which can in turn be financed in various ways. Second, it focuses on the extent to which harmonisation of current national unemployment benefit schemes would be needed. Harmonisation implies changing national legislation and practices, which creates political and administrative difficulties. Third, the study examines the problem of schemes generating regular monetary transfers from certain countries to others, and the associated problem of moral hazard. There are two broad ways to solve this problem: ex-ante or ex-post balancing. Fourth, it discusses which countries should join the EUBS. There are arguments for limiting membership to euro-area members, or for extending it to the entire European Union, but participation should in any case be mandatory. Finally, it reviews the costs of the various forms of EUBSs proposed in the literature, concluding that they tend to stay below 1% of the member countries’ aggregate GDP. This paper constitutes the first paper prepared in the context of a research project on “The Feasibility and Added Value of a European Unemployment Benefits Scheme”, commissioned by DG EMPL of the European Commission and carried out by a consortium of researchers led by CEPS. It is re-published by CEPS with the kind permission of the European Commission and can also be downloaded from the Commission’s website.
    Date: 2015–09
  18. By: Vassilis Monastiriotis; Cigdem Borke Tunali
    Abstract: High and persistent external imbalances have become a key concern in the global economy, particularly after the Global Financial Crisis. The issue is particularly pertinent in Europe, as it poses challenges not only for its economic cohesion but also for its political coherence and the viability of the European project at large. In this study we investigate the sustainability of external imbalances in 15 countries from what is increasingly seen as the European periphery over the period 2000-2012 using quartely data. We apply a range of methods and compare across them to obtain a comprehensive picture of the patterns characterising external imbalances in this area. We find that external imbalances are on the whole large and, despite some significant adjustments in the post-crisis period, they continue to follow paths that are possibly unsustainable. Our results show a higher likelihood of confirming sustainability when looking separately at the current account and the net foreign asset position than when looking jointly at the trade and capital accounts (and thus at the overall fiscal reaction function – Bohn, 2007). This suggests, albeit tentatively, problems and vulnerabilities that go beyond simple concerns about price competitiveness and the trade performance of the countries under study.
    Keywords: external imbalances, current account sustainability, European periphery, error correction
    Date: 2016–03

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