Macroeconomic Imbalances as Indicators for Debt Crises in Europe

Tobias Knedlik and Gregor von Schweinitz

No 12/2011, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: European authorities and scholars published proposals on which indicators of macroeconomic imbalances might be used to uncover risks for the sustainability of public debt in the European Union. We test the ability of four proposed sets of indicators to send early-warnings of debt crises using a signals approach for the study of indicators and the construction of composite indicators. We find that a broad composite indicator has the highest predictive power. This fact still holds true if equal weights are used for the construction of the composite indicator in order to reflect the uncertainty about the origin of future crises.

Keywords: macroeconomic surveillance; macroeconomic imbalances; economic governance; signals approach; European Union (EU); European Monetary Union (EMU); Makroökonomische Überwachung; makroökonomische Ungleichgewichte; wirtschaftspolitische Koordinierung; Europäische Union (EU); Europäische Währungsunion (search for similar items in EconPapers)
JEL-codes: C14 E61 E62 F40 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Macroeconomic Imbalances as Indicators for Debt Crises in Europe (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:iwh-12-11

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