2013年-IMF国际货币组织全球_The_Evolution_of_Current_Account_Deficits_in_the_Euro_Area_Periphery_and_the_Baltics_Many_Paths_to_the_Same_Endpoint_23页_1mb

Summary of "The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics: Many Paths to the Same Endpoint"

Core Content

This paper examines the evolution of current account deficits in the euro area periphery (Greece, Ireland, Portugal, Spain) and the Baltic countries (Estonia, Latvia, Lithuania) leading up to the global financial crisis. It argues that while conventional explanations focus on export performance and domestic demand booms, non-trade components such as transfers and net income balances also played a critical role in the development of these deficits.

Main Views

• Current account deficits in these regions were driven by a combination of factors, including:

  • Deteriorating export performance due to rising unit labor costs (ULC) and real effective exchange rate (REER) appreciation.
  • Domestic demand-driven booms fueled by capital inflows, cheap credit, and fiscal excess.
  • Declining transfers and rising net income payments, which were often overlooked in the literature.

• Trade balance did not always reflect the full extent of current account deterioration. In some cases, such as Greece and Portugal, non-trade components significantly contributed to the widening current account deficits, even when the trade balance remained stable or improved.

• The euro had a dual effect: it removed currency risk and increased financial integration, which made the periphery and Baltics more attractive to capital flows, thereby exacerbating domestic demand booms and current account imbalances.

• Housing booms were a key driver of import demand in several countries, particularly in Ireland, Spain, and Greece, and were closely linked to the surge in capital inflows and domestic consumption.

Key Information

I. Introduction

• The euro area periphery and Baltic countries faced large and growing current account deficits before the financial crisis.
• Conventional explanations focus on export performance and domestic demand booms.
• The paper highlights the importance of non-trade components such as transfers and net income balances.
• Competitiveness issues were not the main cause of current account deficits; rather, persistent failure to adjust to existing imbalances played a major role.

II. Different Paths to External Imbalances

A. Exports

• Export performance remained relatively stable in most countries, with only limited declines in the tradable sector.
• Non-tradable sector ULC increased significantly, leading to a deterioration in economy-wide ULC.
• Estonia and Latvia saw notable increases in export-to-GDP ratios, suggesting that competitiveness was not the main issue.
• Portugal and Greece had declining export market shares, but this was not due to competitiveness loss.

B. Imports

• Domestic demand booms led to a surge in imports, especially in housing and consumption.
• Capital inflows and cheap credit fueled these booms, increasing the demand for imported goods and services.
• Fiscal deficits also contributed to the increase in domestic demand, leading to higher import levels.
• Net income payments increased, further worsening the current account balance.

C. Non-Trade Components

• Declining transfers and rising net income payments were significant contributors to current account deficits.
• Households and firms borrowed to maintain spending levels when transfers declined, leading to a persistent failure to adjust to trade deficits.
• Non-trade components accounted for most of the current account deterioration, even when trade balances were stable or improved.

III. Current Account Developments for Individual Countries

A. Greece

• Experienced a domestic boom, fiscal deficits, declining transfers, and rising net income payments.
• The trade balance deteriorated, but this was not due to competitiveness loss.
• Service exports performed well, but merchandise exports were affected by REER appreciation.
• Housing prices and residential investment surged, contributing to import growth.

B. Portugal

• The current account deteriorated steadily, largely due to declining transfers and rising net income payments.
• Trade balance remained relatively stable, but non-trade components accounted for most of the current account deterioration.
• Housing prices and residential investment grew significantly, especially in the late 1990s and early 2000s.
• ULC in the non-tradable sector increased faster than in the tradable sector, leading to a broader deterioration in competitiveness.

C. Spain

• Current account deficits were driven by a deteriorating trade balance, rising net income payments, and declining transfers.
• Export performance remained stable despite a decline in merchandise export market share.
• Housing boom and capital inflows led to a significant increase in import demand.
• ULC in the non-tradable sector increased, worsening the overall economic balance.

D. Ireland

• Experienced a capital inflow-driven domestic boom, especially in the housing sector.
• Current account deficits were smaller compared to other peripheral countries, but still significant.
• Trade surplus declined due to faster import growth than export growth.
• Net income payments and declining transfers contributed to the current account deterioration.

Conclusion

• The current account deficits in the euro area periphery and the Baltics were not solely due to competitiveness or export performance.
• Non-trade components, particularly transfers and net income balances, played a major role in the evolution of these deficits.
• Domestic demand booms, fueled by capital inflows, cheap credit, and fiscal excess, were a key driver of import growth.
• Persistent failure to adjust to existing imbalances, especially in the face of declining transfers, led to growing current account deficits.
• The euro facilitated financial integration and capital inflows, which exacerbated the imbalances in these economies.