Sudden Stops and Asset Purchase Programmes in the Euro Area

This paper analyses the incidence and severity of sudden stops in euro area countries before and after the introduction of the ECB’s asset purchase programmes. We define sudden stops as abrupt declines in private net financial inflows, i.e. total flows adjusted for EU and IMF loans and changes in TARGET2 balances. We document that sudden stop were more frequent and more severe in euro area countries compared to other OECD economies over the period 1999–2020. We find that the susceptibility of euro area countries to severe sudden stops mainly reflects domestic fundamentals whereas there is no clear evidence of an adverse direct effect of being part of the euro area. Moreover, our econometric analysis suggests that the ECB asset purchase programmes have overall almost halved the risk of severe sudden stops in euro area countries. We find tentative evidence that this effect operates through confidence channels.

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Sudden Stops in the Euro Area

Review of Economics and Institutions ◽

10.5202/rei.v3i3.97 ◽

2012 ◽

Vol 3 (3) ◽

Cited By ~ 58

Author(s):

Silvia Merler ◽

Jean Pisani-Ferry

Keyword(s):

Euro Area ◽

Sudden Stops

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Sudden stops and current account reversals: the euro area experience

SEEU Review ◽

10.1515/seeur-2015-0026 ◽

2015 ◽

Vol 11 (2) ◽

pp. 23-32

Author(s):

Vesna Georgieva Svrtinov ◽

Olivera Gorgieva-Trajkovska ◽

Riste Temjanovski

Keyword(s):

Current Account ◽

Euro Area ◽

Capital Inflows ◽

Sudden Stops ◽

Private Capital ◽

The Core ◽

Current Account Deficits ◽

The Impact ◽

The Relationship ◽

Current Account Reversals

Abstract The paper analyzes the impact of massive capital flows and possible sudden stops on current account reversals. The aim of this paper is to consider the relationship between sudden stops and current account reversals in the eurozone and to explain the possibility of a balance-of-payment crisis within a monetary union. Peripheral eurozone countries experienced significant private-capital inflows from the core countries, followed by unambiguously massive outflows. Due to this, peripheral countries ran sustained current account deficits while core countries ran surpluses. At the end we analyze the evolution of current-account balances in the non-euro area EU countries and the peripheral euro-area countries, and we find out that current account deficits could be maintained over a longer period of time in the peripheral euro-area countries.

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