Does the trade balance really matter for regions?

Abstract

Abstract This paper explores the reasons why regional economics and policymaking do not focus on the regional balance of payments, although relevant imbalances – comparing with countries – may arise. The main purpose of the paper is, on one hand, to gauge the importance of these external imbalances in regional economies, with that concept being confined to the trade (goods and services) account. Notwithstanding the limited data available, empirical evidence for EU regions is put forward to supporting the idea that regions meet more frequently trade imbalances of relevant size than those faced by countries. Discussion centers as well on why regions can run wider trade deficits than nations and it is argued that as regions avoid sustainability constraints they may even benefit from those imbalances.