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

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  • Kuziemska-Pawlak, Kamila
  • Mućk, Jakub

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.

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  • Kuziemska-Pawlak, Kamila & Mućk, Jakub, 2020. "Structural current accounts in the European Union countries: cross-sectional exploration," Economic Modelling, Elsevier, vol. 93(C), pages 445-464.
    • Handle: RePEc:eee:ecmode:v:93:y:2020:i:c:p:445-464
    DOI: 10.1016/j.econmod.2020.08.011
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    Cited by:

    1. Comunale, Mariarosaria, 2022. "A panel VAR analysis of macro-financial imbalances in the EU," Journal of International Money and Finance, Elsevier, vol. 121(C).
    2. Ramona Tiganasu & Gabriela Carmen Pascariu & Dan Lupu, 2022. "Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 667-698, September.

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    More about this item

    Keywords

    Current account; Structural current account; Real exchange rate; Cross-sectional estimation; European current account imbalances;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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