Structural current accounts in the European Union countries: cross-sectional exploration

Kamila Kuziemska-Pawlak and Jakub Mućk

Economic Modelling, 2020, vol. 93, issue C, 445-464

Abstract: This paper investigates structural determinants of the current account balance and assesses whether the current accounts in the European Union countries were consistent with the calculated structural current accounts between 1995 and 2017. We estimate current account regressions using cross-sectional data for 94 countries in 2008–2016 and confirm the main findings with panel data estimates. We document that the current account depends on the real exchange rate in a nonlinear way. The real exchange rate affects the current account at low income levels, but it ceases to be important at high income levels. Based on structural current account estimates for the European Union countries, we document that after the 2008 crisis current accounts adjusted towards structural current accounts in deficit countries, but persisted above structural current accounts in surplus countries.

Keywords: Current account; Structural current account; Real exchange rate; Cross-sectional estimation; European current account imbalances (search for similar items in EconPapers)
JEL-codes: F31 F32 F41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Structural current account benchmarks for the European Union countries: cross-section exploration (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:93:y:2020:i:c:p:445-464

DOI: 10.1016/j.econmod.2020.08.011

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