4 April 2014
The Balance of Payments Crisis in the Euro Area Periphery
March 10th, 2014
in econ_news
by Matthew Higgins and Thomas Klitgaard - Federal Reserve Bank of New York
Countries in the euro area periphery borrowed heavily from abroad in the years leading up to the sovereign debt crisis, largely to finance increased consumption and housing investment. When the crisis hit in 2010, capital flight by private investors forced these countries to bring domestic spending back into line with domestic incomes—the same adjustment required of countries facing a typical balance of payments crisis.