Determinants of current account developments in the central and east European EU member states - consequences for the enlargement of the euro area

Sabine Herrmann and Axel Jochem

No 2005,32, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: The current accounts of most EU member states in central and eastern Europe have been showing growing deficits in recent years. According to panel estimates the deficits can be attributed primarily to factors characteristic for the stage of development, ie the relative income level and high capital building. The positive impact of a closing income gap, however, is largely compensated by real appreciation. The net effect of government budget deficits is rather small, since they are mostly financed by private saving. Further integration of the financial sector is likely to improve the current accounts. Although the current account positions do not require fundamental policy reversals, there are clear risks of exchange rate adjustments that should be reduced before entering the euro area.

Keywords: current account; new EU member countries; catching-up process (search for similar items in EconPapers)
JEL-codes: F15 F32 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-ifn and nep-tra
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Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:4226

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