The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics: Many Paths to the Same Endpoint

Joong Kang and Jay Shambaugh

No 2013/169, IMF Working Papers from International Monetary Fund

Abstract: Explanations of the large current account deficits for the euro area periphery and the Baltics in the run up to the crisis revolve around two main factors: deteriorating export performance or demand driven booms. We add that there were important movements in transfers and net income balances. While export performance remained relatively stable in most countries, for some countries, when transfers declined, households and firms borrowed so as to maintain the same level of spending. This was part of a persistent failure to adjust to trade deficits, which, along with rising net income payments, led to growing current account deficits. All of these factors played varying roles in the development of current account deficits across these countries.

Keywords: WP; export; deficit; IMF staff calculation; current account deficit; transfer; income balance; competitiveness; domestic boom; merchandise export market share; Merchandise export market share; current account improvement; import volume growth; export sector performance; export decline; estimate export performance; export market share; export volume; current account development; current account movement; Current account deficits; Current account; Trade balance; Exports; Export performance; Baltics; Global (search for similar items in EconPapers)
Pages: 23
Date: 2013-07-17
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Citations: View citations in EconPapers (38)

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