The Sustainability of External Imbalances in the European Periphery

  • Vassilis MonastiriotisEmail author
  • Cigdem Borke Tunali
Research Article


The issue of external imbalances has become a key concern in the global economy, gaining particular prominence also inside Europe, following the Eurozone crisis. Comparatively, however, evidence for the European periphery is much less developed. In this study we investigate the sustainability of external imbalances in 15 countries from the EU’s so-called eastern and super-periphery across a range of sustainability tests. We find that external imbalances are, on the whole, large and, despite some significant adjustments in the post-crisis period, they continue to follow paths that are possibly unsustainable. Our results show a higher likelihood of confirming sustainability when looking separately at the current account and the net foreign asset position than when looking jointly at the current and capital accounts (and thus at the intertemporal budget constraint – Bohn J Monet Econ 54(7):1837–1847, 2007). This suggests, albeit tentatively, problems and vulnerabilities that go beyond simple concerns about price competitiveness and the trade performance of the countries under study.


External imbalances Current account sustainability European periphery Error correction 

JEL Classification

F32 F41 



We would like to thank Maria Siranova and Giorgos Hortareas for their useful comments on earlier drafts of the paper; conference participants at the EEFS 2018 conference in London; as well as two anonymous referees for their valuable comments and suggestions. All errors and omissions remain our own. Part of this research was completed while Assoc. Prof. Tunali was a visiting fellow at the LSE Research Unit on Southeast Europe (LSEE).

Supplementary material

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© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.European InstituteLondon School of EconomicsLondonUK
  2. 2.Department of EconomicsIstanbul UniversityIstanbulTurkey

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