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Title: Policy Coordination, Convergence, and the Rise and Crisis of EMU Imbalances

Author(s): Giuseppe Bertola

Publication Date: May 2013

Keyword(s): Current accounts, Economic integration and Income distribution

Programme Area(s): International Macroeconomics

Abstract: When economic integration fosters expectations of productivity convergence, capital flows are driven by consumption-smoothing anticipation of income growth patterns as well as by factor-intensity equalization. In the euro area, financial integration eased accumulation of international imbalances, but the convergence that appears to have been expected was not realized. The resulting crisis casts doubt on the sustainability of the current configuration of the European integration process. A robust and coherent European market and policy integration process would require supranational implementation of the behavioral constraints and contingent redistribution schemes that traditionally operate within National socio-economic systems, and have been weakened in recent experience by uncoordinated policy competition.

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Bibliographic Reference

Bertola, G. 2013. 'Policy Coordination, Convergence, and the Rise and Crisis of EMU Imbalances '. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9471