Structural and cyclical factors of the current account balance and the case of Greece

Hiona Balfoussia and Anastasios Rizos
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Hiona Balfoussia: Bank of Greece
Anastasios Rizos: Bank of Greece

Economic Bulletin, 2026, issue 63, 27-46

Abstract: This paper investigates the structural and cyclical determinants of the current account balances for European economies, focusing especially on the factors underlying recent fluctuations in the Greek current account balance. Specifically, we investigate the long-run and short-run determinants of EU countries’ current account balances, using panel data analysis. The long-run drivers are identified as structural, while the short-run as cyclical. Subsequently, these estimates are used to calculate the contribution of the cyclical and structural components to the changes in Greece’s current account balance over the recent period. Our results indicate that the changes in the Greek current account balance recorded in recent years are associated with improvements in its structural component, while the short-term negative change of the current account balance in 2024 is attributed to cyclical factors. These findings suggest that efforts to encourage investment in critical areas, inter alia through the Recovery and Resilience Facility, to improve the investment environment and pursue structural reforms, are in the right direction.

Keywords: current account balance; structural component; cyclical component; panel data analysis (search for similar items in EconPapers)
JEL-codes: C23 F32 F40 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bog:econbl:y:2026:i:63:p:27-46

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