ICEF/LFE Research Seminar, Daniele Siena (Banque De France)

On Thursday, January 22 at 4.40 pm, room 3211 (Shabolovka str. 26) ICEF and LFE held the Research Seminar in Finance.
Speaker: Daniele Siena (Banque De France)
Theme: "The European Monetary Union and Imbalances: Is it an Anticipation Story?"

Abstract: This paper investigates the sources of the current account imbalances experienced within the EMU before the Great Recession by assessing the role played by anticipated shocks. It starts by documenting that since 1996, and so before the actual introduction of the euro, countries in the euro area periphery running the largest current account (CA) deficits were also the ones with real exchange rates appreciating and output growing faster than trend. Then, in order to understand the causes of these patterns, it develops and estimates a small open economy DSGE model which encompasses a variety of possible unanticipated and anticipated shocks. Two are the main findings. First, anticipated reductions in international borrowing costs are the most important source of the observed CA imbalances. Second, anticipated shocks account for almost two thirds of the fluctuations of the CA and for one half of those of the real exchange rate.

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