An anatomy of the spanish current account adjustment: the role of permanent and transitory factors

Enrique Moral-Benito and Francesca Viani

No 1737, Working Papers from Banco de España

Abstract: This paper aims to identify how much of the recent current account adjustment in Spain can be explained by cyclical factors. For this purpose, we consider the cross-country regressions in the IMF’s External Balance Assessment (EBA) methodology but allowing for country-specific slopes and intercepts. The good fit of these regressions implies negligible residuals for most countries, and, as a result, the positive analysis of current account decompositions provides a more informative assessment of the external balance drivers. According to our findings, around 60% of the 12 pp. adjustment of the Spanish external imbalance over the 2008-2015 period can be explained by transitory factors such as the output gap, the oil balance, and the financial cycle. The remaining 40% is explained by factors such as the cyclically-adjusted fiscal consolidation, population aging, lower growth expectations, or competitiveness gains, which can all be considered as more permanent phenomena.

Keywords: current account; global imbalances (search for similar items in EconPapers)
JEL-codes: F21 F32 F41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017-10
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: An anatomy of the Spanish current account adjustment: the role of permanent and transitory factors (2020)
Working Paper: An anatomy of the Spanish current account adjustment: the role of permanent and transitory factors (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1737

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