engleski

The sources of external imbalances in the intra- Euro zone from 1999. – 2008.

This paper gives an overview over the insights into the causes of external imbalances in intra - euro zone countries in period after the formation of European Monetary Union (EMU) i.e. inception of the euro, running up to the 2008. The present debt crisis is partly a consequence of rising external imbalances in this period. According to the largely accepted traditional explanations, the deficiencies in international competitiveness in some countries are subject to interest rate convergence in core and periphery EMU countries. In this paper will be exposed the pre euro period macroeconomic stylized facts used for creating assumptions for the general equilibrium model evolved by Farmer. The two - country one-good overlapping generations model with production, capital accumulation and public debt, with respect to capital output ratio and under assumption of international capital mobility will show how financial integration deteriorated the net foreign asset positions of initially low- interest rates, the periphery countries. Theoretical findings will be compared with empirical observations and complemented with other explanations, such as -

external imbalance ; overlapping generations model ; international competitiveness

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