1. Monitoring macroeconomic imbalances: the use of BoP data
Alexandr Hobza
DG Economic and Financial Affairs
BoP Working Group, 27 November 2012

2. The macroeconomic imbalance procedure
The start of 2nd year of its application
28 November– The Alert Mechanism Report (part of the Annual Growth Survey package)
based on economic reading of MIP scoreboard and additional indicators
In-depth reviews
Preventive recommendations as part of European Semester package – end-May 2 2

3. Current workstrems involving BoP data
The tools to help prepare IDRs – graphs, tables
The study on current account surpluses in the EU
Analytical framework for assessment of external sustainability
CA norms
NIIP-stabilising CA
Monitor to assess progress in rebalancing 3 3

4. Study on current account surpluses
AIM:
to assess whether large and persistent surpluses are damaging and require close policy guidance
KEY QUESTIONS:
Do surpluses raise risks similar to those of deficits?
Is it in the self-interest of surplus countries to reduce their surpluses? Is there causality/nexus between surpluses and deficits in the EA?
Is there a sustainable rebalancing on-going? What should be the contribution of surplus countries? Will the balanced current account of the EA continue to hold in the future? 4 4

5. Data used in the study Used different sources: EUROSTAT BoP
Complemented with IMF, OECD, BIS and WB
National sources (DE, IT, LU, …)
Financial flows derived from stocks (PI, OI) accounting for valuation effects 5 5

6. Are surpluses optimal? Valuation effects.
Current account balances of surplus/deficit countries as % of GDP 6 6

7. Are surpluses optimal? Valuation effects.
Current account balances of surplus/deficit countries as % of GDP 7 7

8. Is there nexus between surpluses and deficits? Financial interlinkages.8 8

9. Is there nexus between surpluses and deficits? Financial interlinkages.9 9

10. Financial interlinkages. Accounting for indirect flows.10 10

11. Financial interlinkages. Spillovers from rebalancing in DE.11 11

12. Is there nexus between surpluses and deficits? Trade interlinkages.12 12

13. Is there nexus between surpluses and deficits? Trade interlinkages.13 13

14. Surveillance on external imbalances and the data needs: an overview
Disaggregated data from the financial account
at least the same level of disaggregation as the IIP/income balance
split of portfolio investment (equity/debt)
sectoral split
maturity structure (e.g. WB/IMF)
Geographical breakdown of the BoP (CA, KA and FA) and ideally IIP
credit and debit
Data on external debt per sector in nominal value, maturity and currentcy composition 14 14

15. The preventive arm of the MIP
No problem Procedure stops.
Alert mechanism
Commission present report based on scoreboard indicators and economic reading
identify Member States where potential risks exist
ECOFIN/Euro group discuss for the Commission to take account of.
In-depth review
Commission prepares in depth country studies, using much wider set of indicators and analytical tools, and takes account of
other Council recommendations
plans in SCP/ NRPs;
warnings or recommendations from the ESRB.
Imbalance exists
Commission/Council recommendations under Article 121.2
Severe imbalance
Commission/Council recommendation on the existence of an « excessive imbalance » under article 121.4

16. Scope of MIP surveillance
External positions (e.g. current accounts, net international investment positions)
Competitiveness developments (e.g. REERs, ULCs)
Export performance (e.g. export market shares)
Private sector indebtedness (e.g. credit, debt)
Public sector indebtedness
Assets markets (e.g. housing)
External imbalances
Internal imbalances