Current accounts in the euro area: An intertemporal approach

Jose Campa and Angel Gavilan

Journal of International Money and Finance, 2011, vol. 30, issue 1, 205-228

Abstract: Current accounts have diverged substantially among euro area countries since the creation of the euro. This divergence has raised concerns about the sustainability of some member countries' external indebtedness. This paper uses an intertemporal model of the current account to analyze the fluctuations in current account balances experienced by euro area countries over the last three decades and to disentangle its determinants. We find that the model is not rejected for six of the ten euro area countries examined (Belgium, France, Italy, Netherlands, Portugal and Spain), although it tends to underestimate their current account volatility. For these countries, we derive the expectations about future income and relative prices, which, according to the model, underlie their current account balances. Expectations about future growth increased in all Southern European countries at the creation of the euro, but they diverged considerably by 2005. While in Portugal these expectations were below its historical mean by then, in Spain they were at an historical high.

Keywords: Current; account; Euro; area; Present; value; model; Financial; integration (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261-5606(10)00108-7
Full text for ScienceDirect subscribers only

Related works:
Journal Article: Current accounts in the euro area: an intertemporal approach (2007)
Working Paper: Current accounts in the euro area: An intertemporal approach (2006)
Working Paper: Current accounts in the euro area: An intertemporal approach (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:30:y:2011:i:1:p:205-228

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().