Marta Wajda-Lichy

Cracow University of Economics Poland

wajdam@uek.krakow.pl

Excessive current account surpluses in euro zone economies – problem of particular economies or the euro area as a whole?

ABSTRACT. This paper focused on current account imbalances, which is characteristic for euro area economies. The aim of this article is to analyse a problem of external imbalances from the perspective of the surplus countries. This approach is related to new EU regulations on macroeconomic imbalances, which point that both excessive deficits and surpluses are symptoms of disequilibria and should be corrected. The re- search question is whether a persistent current account surplus signals macroeconomic problems, and if so, what are the areas of concern and who suffers from external disequilibria: a surplus country or the rest of the euro zone economies. The article provides an analysis of macroeconomic aggregates accompanying the accumulation of excessive current account surpluses in two euro zone economies - Germany and Netherlands. The analysis is based on fundamental balance of payments identity and national income identity which are helpful in interpreting relations between current account, net international investment position and macroeconomic aggregates like: saving, consumption and investment. The article revealed that the current account surpluses in the two examined euro zone economies negatively correspond both to private consumption and domestic investment, however the scale of investment reduction was bigger than consumption. Moreover, conventional Feldstein-Horioka regressions of investment on saving run on a sample of OECD and euro zone countries confirmed lower coefficients for EMU member states, suggesting stronger “uncoupling” of domestic saving from domestic capital formation in integrated economies. Another conclusion is related to big foreign asset accumulation, which could create excessive foreign investment risk. The last observation is that among the euro area countries the two studied economies were ones of the most affected by protectionist actions.

Received: July, 2015

1st Revision: September, 2015

Accepted: November, 2015

DOI: 10.14254/2071-8330.2015/8-3/8

JEL Classification: F13, F15, F32, F45

Keywords: : Euro area, Germany, Netherlands, external imbalances, current account, trade policy, global economic crisis