Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v93y2020icp445-464.html
   My bibliography  Save this article

Structural current accounts in the European Union countries: cross-sectional exploration

Author

Listed:
  • Kuziemska-Pawlak, Kamila
  • Mućk, Jakub
Abstract
This paper investigates structural determinants of the current account balance and assesses whether the current accounts in the European Union countries were consistent with the calculated structural current accounts between 1995 and 2017. We estimate current account regressions using cross-sectional data for 94 countries in 2008–2016 and confirm the main findings with panel data estimates. We document that the current account depends on the real exchange rate in a nonlinear way. The real exchange rate affects the current account at low income levels, but it ceases to be important at high income levels. Based on structural current account estimates for the European Union countries, we document that after the 2008 crisis current accounts adjusted towards structural current accounts in deficit countries, but persisted above structural current accounts in surplus countries.

Suggested Citation

  • Kuziemska-Pawlak, Kamila & Mućk, Jakub, 2020. "Structural current accounts in the European Union countries: cross-sectional exploration," Economic Modelling, Elsevier, vol. 93(C), pages 445-464.
    • Handle: RePEc:eee:ecmode:v:93:y:2020:i:c:p:445-464
    DOI: 10.1016/j.econmod.2020.08.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999320311664
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2020.08.011?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
    2. Leonor Coutinho & Alessandro Turrini & Stefan Zeugner, 2018. "Methodologies for the Assessment of Current Account Benchmarks," European Economy - Discussion Papers 086, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Carlin, Wendy & Glyn, Andrew & Van Reenen, John, 2001. "Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness," Economic Journal, Royal Economic Society, vol. 111(468), pages 128-162, January.
    4. Anonymous, 1952. "International Monetary Fund," International Organization, Cambridge University Press, vol. 6(3), pages 446-447, August.
    5. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799, Elsevier.
    6. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, April.
    7. Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
    8. Tarlok Singh, 2007. "Intertemporal Optimizing Models Of Trade And Current Account Balance: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 25-64, February.
    9. Ca’ Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2012. "Thousands of models, one story: Current account imbalances in the global economy," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1319-1338.
    10. Sophocles Brissimis & George Hondroyiannis & Christos Papazoglou & Nicholas Tsaveas & Melina Vasardani, 2012. "Current account determinants and external sustainability in periods of structural change," Economic Change and Restructuring, Springer, vol. 45(1), pages 71-95, February.
    11. Sidney S. Alexander, 1952. "Effects of a Devaluation on a Trade Balance," IMF Staff Papers, Palgrave Macmillan, vol. 2(2), pages 263-278, April.
    12. Mr. Luca A Ricci & Mr. Jonathan David Ostry & Mr. Jaewoo Lee & Mr. Alessandro Prati & Mr. Gian M Milesi-Ferretti, 2008. "Exchange Rate Assessments: CGER Methodologies," IMF Occasional Papers 2008/002, International Monetary Fund.
    13. Bournakis, Ioannis & Tsoukis, Christopher, 2016. "Government size, institutions, and export performance among OECD economies," Economic Modelling, Elsevier, vol. 53(C), pages 37-47.
    14. Giancarlo Corsetti & Gernot J. Müller, 2006. "Twin deficits: squaring theory, evidence and common sense [‘Temporary and permanent government spending in an open economy: some evidence for the United Kingdom’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(48), pages 598-638.
    15. Ansgar Belke & Christian Dreger, 2013. "Current Account Imbalances in the Euro Area: Does Catching up Explain the Development?," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 6-17, February.
    16. repec:fip:fedgsq:y:2005:i:mar10 is not listed on IDEAS
    17. Anonymous, 1952. "International Monetary Fund," International Organization, Cambridge University Press, vol. 6(4), pages 644-646, November.
    18. Anonymous, 1952. "International Monetary Fund," International Organization, Cambridge University Press, vol. 6(1), pages 121-125, February.
    19. Vansteenkiste, Isabel & Nickel, Christiane, 2008. "Fiscal policies, the current account and Ricardian equivalence," Working Paper Series 935, European Central Bank.
    20. Gossé, Jean-Baptiste & Serranito, Francisco, 2014. "Long-run determinants of current accounts in OECD countries: Lessons for intra-European imbalances," Economic Modelling, Elsevier, vol. 38(C), pages 451-462.
    21. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, April.
    22. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
    23. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
    24. Beata K. Bierut & Kamila Kuziemska-Pawlak, 2017. "Competitiveness and Export Performance of CEE Countries," Eastern European Economics, Taylor & Francis Journals, vol. 55(6), pages 522-542, November.
    25. Ben S. Bernanke, 2005. "The global saving glut and the U.S. current account deficit," Speech 77, Board of Governors of the Federal Reserve System (U.S.).
    26. Jeffrey D. Sachs, 1981. "The Current Account and macroeconomic Adjustment in the 1970s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 201-282.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Comunale, Mariarosaria, 2022. "A panel VAR analysis of macro-financial imbalances in the EU," Journal of International Money and Finance, Elsevier, vol. 121(C).
    2. Ramona Tiganasu & Gabriela Carmen Pascariu & Dan Lupu, 2022. "Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 667-698, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gnimassoun, Blaise, 2015. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 36-74.
    2. Valerio Della Corte & Claire Giordano, 2021. "Methodological issues in the estimation of current account imbalances," Questioni di Economia e Finanza (Occasional Papers) 617, Bank of Italy, Economic Research and International Relations Area.
    3. Afonso, António & Huart, Florence & Tovar Jalles, João & Stanek, Piotr, 2022. "Twin deficits revisited: A role for fiscal institutions?," Journal of International Money and Finance, Elsevier, vol. 121(C).
    4. Florian Morvillier, 2018. "On the impact of the launch of the euro on EMU macroeconomic vulnerability," EconomiX Working Papers 2018-51, University of Paris Nanterre, EconomiX.
    5. Mr. Luis M. Cubeddu & Signe Krogstrup & Gustavo Adler & Mr. Pau Rabanal & Mai Dao & Mrs. Swarnali A Hannan & Luciana Juvenal & Ms. Carolina Osorio-Buitron & Cyril Rebillard & Mr. Daniel Garcia-Macia &, 2019. "The External Balance Assessment Methodology: 2018 Update," IMF Working Papers 2019/065, International Monetary Fund.
    6. Bussière, Matthieu & Ca' Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2010. "Methodological advances in the assessment of equilibrium exchange rates," Working Paper Series 1151, European Central Bank.
    7. Hürtgen, Patrick & Rühmkorf, Ronald, 2014. "Sovereign default risk and state-dependent twin deficits," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 357-382.
    8. Blaise Gnimassoun, 2014. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," Working Papers hal-04141342, HAL.
    9. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799, Elsevier.
    10. Gourinchas, Pierre-Olivier & Rey, Hélène, 2014. "External Adjustment, Global Imbalances, Valuation Effects," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 585-645, Elsevier.
    11. Florian Morvillier, 2018. "On the impact of the launch of the euro on EMU macroeconomic vulnerability," Working Papers hal-04141675, HAL.
    12. Tarlok Singh, 2007. "Intertemporal Optimizing Models Of Trade And Current Account Balance: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 25-64, February.
    13. Leonor Coutinho & Alessandro Turrini & Stefan Zeugner, 2018. "Methodologies for the Assessment of Current Account Benchmarks," European Economy - Discussion Papers 086, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    14. Maurice Obstfeld, 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," NBER Working Papers 8369, National Bureau of Economic Research, Inc.
    15. Sebil Olalekan Oshota & Ibrahim Adegoke Adeleke, 2015. "Determinants of the Current Account Balance in Nigeria, Ghana and Cote d’Ivoire," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(3), pages 127-145, June.
    16. Coutinho, Leonor & Turrini, Alessandro & Zeugner, Stefan, 2022. "Assessing the euro area current account," Journal of International Money and Finance, Elsevier, vol. 121(C).
    17. Giovanni P. Olivei, 2000. "The role of savings and investment in balancing the current account: some empirical evidence from the United States," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 3-14.
    18. Boonman, Tjeerd & Litsios, Ioannis & Pilbeam, Keith & Pouliot, William, 2022. "Modelling the trade balance between the northern and southern eurozone using an intertemporal approach," Journal of International Money and Finance, Elsevier, vol. 121(C).
    19. Helmut Herwartz & Florian Siedenburg, 2007. "Determinants of Current Account Imbalances in 16 OECD Countries: An Out-Of-Sample Perspective," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(2), pages 349-374, July.
    20. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747, Elsevier.

    More about this item

    Keywords

    Current account; Structural current account; Real exchange rate; Cross-sectional estimation; European current account imbalances;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:93:y:2020:i:c:p:445-464. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.