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Article by Florentin Glötzl and Armon Rezai on "A sectoral net lending perspective on Europe" in Cambridge Journal of Economics

Florentin Glötzl has been a Re­search As­so­ci­ate at the In­sti­tute of Eco­nom­ics until re­cently and Ar­mon Rezai is an Assist­ant Pro­fessor at the In­sti­tute. Both work at the Re­search Area Mac­roe­co­nom­ics and En­vir­on­ment.

The article has now been pub­lished at the Cam­bridge Journal of Eco­nom­ics.

Ab­stract

We char­ac­ter­ize sect­oral be­ha­vior lead­ing up to and dur­ing the Great Re­ces­sion us­ing re­cently avail­able net lend­ing and net bor­row­ing flows of the in­sti­tu­tional sect­ors in Europe and ap­ply­ing sim­ple stat­ist­ical de­riv­a­tions. We find that (1) many coun­tries of the North­ern group fea­tured low pub­lic de­fi­cits or even budget sur­pluses, cur­rent ac­count sur­pluses and a private sector in a net lend­ing pos­i­tion, while coun­tries of the South­ern peri­phery, the An­glo-Saxon coun­tries and many Eastern European econom­ies took the mir­ror im­age; (2) with the on­set of the crisis, private net lend­ing soared in all coun­tries, while all gov­ern­ments in­curred de­fi­cits, con­sist­ent with the no­tion of a bal­ance sheet re­ces­sion; (3) private net lend­ing is pro-­cyc­lical while pub­lic net lend­ing is coun­ter­cyc­lical in all coun­tries; (4) house­hold net lend­ing tends to lead the busi­ness cycle, while cor­por­ate net lend­ing tends to lag it; and (5) prom­in­ent con­cepts assert­ing causal re­la­tion­ships in sect­oral net lend­ing, such as Ri­car­d­ian equi­val­ence and the twin de­fi­cit hy­po­thesis, are not sup­por­ted by our data.

Link to the article: ht­tps://aca­demic.oup.com/cje/article/doi/10.1093/cje/bex047/4339293/A-sect­or­al-net-lend­ing-per­spect­ive-on-Europe?guestAc­cess­Key=55024052-e382-4eae-aa44-3d53cd­db472c



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