Author Description

Although Europe In The Aggregate Is A Not A Major Contributor To Global Current Account Imbalances, Its Trade And Financial Linkages With The Rest Of The World Mean That It Will Still Be Affected By A Shift In The Current Configuration Of External Deficits And Surpluses. We Assess The Macroeconomic Impact On Europe Of Global Current Account Adjustment Under Alternative Scenarios, Emphasizing Both Trade And Financial Channels. Finally, We Consider Heterogeneous Exposure Across Individual European Economies To External Adjustment Shocks. Contents; I. Introduction; Ii. Europe's External Position In A Global Context; A. Current Account Balances: Stylized Facts; B. Trade Linkages; C. Financial Linkages; D. The Dynamics Of Net Foreign Asset Positions: A Decomposition; Iii. International Adjustment; A. Unwinding Of Global Imbalances-a Model-based Perspective; B. A Brief Description Of The Model; C. Model-based Adjustment Scenarios; D. Valuation Changes; Iv. Heterogeneity; A. The Trade Channel; B. The Valuation Channel; C. Net External Positions; D. Policy Discussion; V. Conclusions; Appendices 1. Decomposition Of Changes In Net Foreign Assets2. Estimating The Currency Composition Of Net Foreign Assets; A. The Euro Area; B. China; C. Japan; D. United States; References; Tables; 1. Direction Of Trade In Goods, 1984 And 2004; 2. Evolution Of Net Foreign Assets, 2002-2005: Underlying Factors 2002-2005; 3. Capital Gains On External Portfolios In The Euro Area And The United States, 2002-2005; 4. Currency Composition Of Net External Position, 2005; 5. Net Foreign Assets And Capital Gains, Adjustment Scenarios: Effects Of Exchange Rates And Assets Prices 6a. European Countries: Bilateral Trade Patterns, 20046b. Trade Weights In Multilateral Real Exchange Rates; 7. Net Dollar Exposures; 8. Impact Of 'disruptive' Dollar Shock; 9. Current Account And Net Foreign Assets, 2005; Appendix Table; 1. Assumptions On The Composition Of Capital Flows (2006-2015); Figures; 1. Current Account