How income inequality affects euro area current account imbalances

Since the late 2000s financial crisis, a great deal of attention has been focused on the issue of how inequality affects the lives of citizens. But can inequality also explain some of the macroeconomic trends present in European countries? Benedicta Marzinotto writes on the link between inequality and current account imbalances in the Eurozone. Using data going back to the beginning of Economic and Monetary Union, she argues that when capital accounts are fully liberalised and credit market regulation softened, income inequality does affect external positions.