Christian R. Proaño

In a new research paper Christian Schoder, Willi Semmler and I investigate, by means of parametric and non-parametric econometric techniques, to what extent the current account imbalances in the EMU can be considered as sustainable in the long run. Our estimations show that the present EMU imbalances do not seem to be sustainable, and that the introduction of the euro, and the related reduction in the exchange rate flexibility at the national level, may have aggravated these developments. A determined economic policy coordination seems thus be necessary if long-run sustainability of the current account imbalances is to be restored.