The Euro and the Sustainability of Current Account Imbalances
POLICY NOTE
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This note offers policy recommendations based on empirical support that shows current account imbalances in the EMU are unsustainable and may jeopardize stability in the Euro Area.
Their research finds that the introduction of the Euro in 1999 contributed significantly to the external imbalances among member countries and makes a case for ambitious coordination of fiscal and wage policies among member states to facilitate macroeconomic adjustment in the context of a common currency.