On The EU and Euro-zone Stability

TL;DR

This paper uses mathematical and statistical methods to analyze EU and Eurozone current account balances, identifying periods of instability and predicting critical turning points based on data and curve fitting.

Contribution

It introduces a quantitative approach with curve fitting to determine stability phases and predicts the timing of instability for EU and Eurozone economies.

Findings

EU has been unstable since 2011

Eurozone instability expected between 2015 and 2018

Curve fitting reveals critical turning points in balance accumulation

Abstract

The aim of the present article is to offer a strictly mathematical, statistical treatment of the current account balances in EU and in the Eurozone. Based on Eurostat data, an overview of the total and annual balances is first made for different collections among the EU countries. Then, using the Mathematica technical computing software, curve fitting is employed to determine the functions which best reflect how surpluses and deficits accumulate with time. It is shown that both EU and the Eurozone economies ultimately have to pass through a critical, turning point beyond which the accumulation of deficits exceeds the accumulation of surpluses thus marking a period of instability. An interval estimate at a ninety eight percent degree of confidence, yields that EU is found in a phase of instability since 2011 while the instability turning point for the Eurozone is bound to occur any year from 2015 to 2018.