Structural asymmetries and financial imbalances in the eurozone

Arbeitspapier

Almost two decades after the introduction of the common currency, differences in institutional frameworks remain a major source of cross-country heterogeneity in the eurozone. We develop a two-country model with incomplete international markets in which the availability of credit depends on the country's institutional environment. Our main finding is that structural differences in domestic credit environments provide an explanation for the procyclicality of net capital inflows observed in the South of Europe. We show that frictions in domestic credit markets generate asymmetries in the transmission mechanism of shocks that are common to both regions.

Object Details

• ISBN: 978-92-899-2798-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2076

Classification and Topics

• Classification: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; International Factor Movements and International Business: General ; Financial Forecasting and Simulation
• Subject: Cross-border financial markets ; eurozone crisis ; incomplete international asset markets ; structural reforms

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jaccard, Ivan ; Smets, Frank
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2017

Further information

• DOI: doi:10.2866/689795
• Handle: http://hdl.handle.net/10419/175700
• Last update: 10.03.2025, 11:44 AM CET