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Does one need to think about the balance of payments differently when considering a single-market area such as the EU, or a monetary union such as the Eurozone? Do individual US states have a balance of payments, too, and should they?

You have a trade balance, so why should a state have none? But I don't know how relevant that is. For currency moves obviously not. A state might get problems if its people are overdebted, but it is said about 20% of the US GDP go through Washington. So there should be enough solidarity within US states and enough mobility of people to move e.g. to a state with less unemployment, that a state trade balance doesn't matter too much. For the Eurozone that is actually the point where most Eurobreakup-doomsayers (probably most prominent Ambrose Evans-Pritchard from the Telegraph) start. Only about 1% of EU GDP go through Brussels, and the various languages spoken in the Eurozone are a serious impediment to cross-country mobility. That would make individual Eurozone country accounts important.
But still I would argue that for most issues the trade balance of a currency zone is relevant. The EU account I think is mostly irrelevant. The main mechanism of balancing are through exchange rate moves.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sat May 31st, 2008 at 11:00:49 PM EST

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