Seminars in International Economics: Growing imbalances of cross-border investment incomes: A ‘Fault Line’ in the Eurozone? (Online event) | 07.10.2021

The Competence Centre for International Economics Research (FIW) kindly invites to participate in the Seminar in International Economics on the topic

Growing imbalances of cross-border investment incomes: A ‘Fault Line’ in the Eurozone?

Konstantin M. Wacker
University of Groningen, Netherlands

Thursday, 07th of October 2021, 3:00 p.m. (CET)

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The investment income balance has become an important component of current account imbalances – magnitudes above 5% of GDP are not uncommon in major economies. This paper investigates trends, dynamics, and potential determinants of cross-border investment income flows. The essential question I explore in this paper is whether those investment income imbalances can become a substantial problem for countries in the Eurozone, which lacks the exchange rate as an adjustment mechanism for such imbalances.

I find no evidence for a particularly persistent or divergent pattern of imbalances in Euro area countries. However, investment incomes behave fundamentally different from other current account components and a negative association between the two is found exclusively for Euro area countries. This calls for a much more differentiated perspective on the current account in academic analysis and policy.

The seminar series is organised by the Vienna Institute for International Economic Studies (wiiw) in co-operation with FIW, the Centre of Competence in International Economics. The seminar provides a forum for presentation and discussion of recent academic research in the field of international economics.