Long-Run Drivers of Current Account Imbalances in the EU: the Role of Trade Openness
Giuseppe Caivano (giuseppecaivano@hotmail.com) and
Nicola Coniglio
No 03-2016, SERIES from Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro"
Abstract:
This paper investigates, using panel cointegration methods, the long-run drivers of current account imbalances in 15 EU member States during the period 1974-2011. We argue that the degree of trade openness greatly affects the relative strength of the different long-term drivers of current account imbalances. Our empirical results indicate that competitiveness factors strongly affect imbalances in countries with a low trade openness, while the effects weakens as trade openness increases. Similarly, we find evidence of a positive effects of government debt on current account deficits for high openness countries and a negative impact for medium and low openness countries. Our results suggest that the structural heterogeneity in the degree of openness across EU countries might be an important contributor to the diverging patterns in current account balances experienced in the last decades.
Keywords: Current account imbalances; panel cointegration; trade openness (search for similar items in EconPapers)
JEL-codes: D63 E24 O15 O40 (search for similar items in EconPapers)
Pages: 277
Date: 2016-05, Revised 2016-05
New Economics Papers: this item is included in nep-eec, nep-int, nep-mac and nep-opm
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Citations: View citations in EconPapers (2)
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