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Long-run determinants of current accounts in OECD countries: Lessons for intra-European imbalances

Francisco Serranito () and Jean-Baptiste Gossé

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Abstract: In this paper we study the long-run determinants of current account balances in 21 OECD countries. We define long-run targets to determine whether actual current account balances are in line with their equilibrium values and find that, following the crisis, the United States, Japan and Spain returned towards their targets but that much remains to be done in Austria, Greece and Germany. Using linear and asymmetric panel VECM models, we find that the speed of convergence of external imbalances is much faster in deficit countries than in surplus ones. These results suggest that the adjustment of intra-European imbalances has to take place in both surplus and deficit countries and should be particularly substantial in the former. This revived the old debate of how to get the surplus countries to adjust.

Keywords: Current account modelling; Global and euro area external imbalances adjustment; Panel cointegration test; Linear and asymmetric panel VECM (search for similar items in EconPapers)
Date: 2014
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01384673
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Published in Economic Modelling, Elsevier, 2014, 38, pp.451-462

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