IMPACT OF EURO-ZONE CRISIS ON
CURRENT ACCOUNT DEFICIT
(Submitted in partial fulfillment of the requirement for the Degree
of Master of Business Administration)
Under the supervision of:
Mrs. Neeta Maheshwari
Assistant professor(MBA Deptt.)
MBA 2ND year
Objectives of the study
Impact of Euro-zone crisis on current
account deficit-An introduction
OBJECTIVES OF THE STUDY
The present study has the following research
To study the impact of euro zone crisis on
Current Account Deficit
To analyze European zone as major
trading partner of India.
To analyze the correlation between INR
and Euro exchange values so that the impact
of euro crisis on Current account deficit can
It is an economic and monetary union of 16
European union members.
INTRODUCTION TO EURO-ZONE
It is the biggest challenge Europe has faced since 1990.
Due to global financial crisis that began in 2007-08 the
euro zone entered its first official recession in third quarter
The official figures were released in Jan 2009.
On 11 Oct 2008, a summit was held in Paris by the Euro
group heads of state Govt. to define a joint action plan for
euro zone and central banks of Europe to stabilize the
WHAT IS CURRENT ACCOUNT DEFICIT?
The Current account balance is part of the Balance of
An imbalance in a nation's balance of payments current
account in which payments received by the country for
selling domestic exports are less than payments made by the
country for purchasing imports
CURRENT ACCOUNT DEFICIT = TOTAL IMPORTS – TOTAL EXPORTS
IMPACT OF EURO CRISIS ON CURRENT
driven primarily by differences in export
performance across surplus and deficit
Current account dynamics are correlated
with unit labour costs (ULC) and imports.
Sebastian Barnes, Jeremy Lawson and Artur Radziwill1
Demographic factors and income and growth differential
has an impact on current account balances.
Both trade openness and structural rigidity improve the
current account imbalances.
Blanchard and Giavazzi (2002)
Current account imbalances could be explained by greater
financial and goods market integration, leading to deficits in
countries with higher growth prospects and surpluses in the
more mature economies.
Krugman and Samuelson
The Greece debt crisis was the cause of adopting
Euro as their currency by replacing drachma.
Greece also could not raise its interest rates
because it was controlled by the European Central
In order to reduce government spending Greece has
to lower wages, prices and costs of goods to remain
Sample; Euro zone and India
Secondary research is an essential part of any
research at the initial stages to understand the outline
and build a framework for the later analysis. The
collection of secondary data involved the pro-active
seeking of data, both qualitative and quantitative,
that already existed and which will useful in the
The data is collected from various sources like, Economic Survey,
official website of International Monetary Fund, Ministry of
Commerce & Industry- Government of India. The exchange rate data
is collected from http://www.oanda.com. OANDA is a market maker
and a trusted source for currency data. It has access to one of the
world's largest historical, high frequency, filtered currency databases.
Euro Zone crisis 2008-2012
Try to use SPSS, Trend Analysis, Correlation and Regression
The study will try to highlight the change in the
direction of Indian exports with the onset of the
The study would indicate if the agitated Euro has
in any way impacted the troubled INR after
analyzing the trade situation between India and
Europe as trade relations of two countries are
important parameters to determine the exchange rate
of the currencies of two nations.
Acharya,S. 2009, India and global Crisis, Academic
Foundation, New Delhi.
Bhigania. M, 2012, “Foreign Trade Policy”, : Indian
Streams Research Journal, Vol.1 (V), pp.1-4
De, P. And C. Neogi 2009, Global economic Crisis:
Implications for Trade and Industrial Restructuring in
south Asia, Paper Presented at the international
conference on “Global Economic Crisis: Impact &
Implications for Industrial Restructuring in Asia”, Held at
Taiwan on 19-20, 8; 2009.
Ghosh. J & Chandrasekhar. P.C, 2009, “The costs of
‘coupling’: the global crisis and the Indian economy”,
Cambridge Journal of Economics, Vol. 33, pp. 725- 739