Current Account Imbalances in the Euro Area (draft version)

Abstract

The dispersion in current account balances among countries in the euro area has widened markedly over the past decade-and-a-half, and especially since 1999. The authors decompose current account positions for euro area countries into intra-euro-area balances and extra-euroarea balances and examine the determinants of these balances. Regarding intra-euro-area balances, they present evidence that capital tends to flow from high-income euro area economies to low-income euro area economies. These flows have increased since the creation of the single currency in Europe.