Journal Article

Balance of payments in the European periphery

Abstract: The countries of the European periphery are experiencing a balance of payments crisis stemming from persistent current account deficits and sharply lower private capital inflows, a condition known as a sudden stop. In countries with fixed exchange rates, sudden stops typically drain foreign reserves, forcing currency depreciation which eventually shifts the current account from deficit to surplus. However, the sudden stop has not prompted the European periphery countries to move toward devaluation by abandoning the euro, in part because capital transfers from euro-area partners have allowed them to finance current account deficits

Keywords: Balance of payments - Western Europe;

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: FRBSF Economic Letter

Publication Date: 2013

Order Number: 01