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Sudden stops in a currency union : some lessons from the euro area

Title data

Kraus, Lena ; Beier, Jürgen ; Herz, Bernhard:
Sudden stops in a currency union : some lessons from the euro area.
In: Scottish Journal of Political Economy. Vol. 66 (February 2019) Issue 1 . - pp. 115-138.
ISSN 0036-9292
DOI: https://doi.org/10.1111/sjpe.12194

Abstract in another language

During the Great Financial Crisis several euro area Member States with current account deficits were subject to sharp reversals of private capital flows. We examine how the specific policy rules of the euro area’s payments system TARGET2 affects the macroeconomic adjustments to sudden stops. We find that - in the short run - public capital flows in form of TARGET2 help euro area deficit countries to stabilize output, consumption, and investment after a sudden stop of private capital inflows. In the long run, however, euro area countries suffer under a prolonged economic recovery and accumulated large public debt as well as higher welfare losses relative to euro peggers.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Sudden stops; TARGET2; credit constraint; capital flows; currency union
Institutions of the University: Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I > Chair Economics I - Univ.-Prof. Dr. Bernhard Herz
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 08 Jan 2019 08:08
Last Modified: 08 Jan 2019 08:08
URI: https://eref.uni-bayreuth.de/id/eprint/46793