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Current account modelling - long-term trends and cyclical factors

In: CNB Global Economic Outlook - September 2019

Author

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  • Oxana Babecka Kucharcukova
  • Jan Bruha

Abstract

This article focuses on current account dynamics in selected Central European countries. We document that the current account is influenced both by long-term trends linked with the convergence process and by cyclical factors of the external environment. On this basis, we argue that both these factors - long-term and cyclical - should be taken into account in current account modelling, and we introduce an empirical model that can incorporate them consistently. We demonstrate this model on the example of the Czech Republic.

Suggested Citation

  • Oxana Babecka Kucharcukova & Jan Bruha, 2019. "Current account modelling - long-term trends and cyclical factors," Occasional Publications - Chapters in Edited Volumes, in: CNB Global Economic Outlook - September 2019, pages 12-16, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:geo2019/9
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    File URL: https://www.cnb.cz/export/sites/cnb/en/monetary-policy/.galleries/geo/geo_2019/gev_2019_09_en.pdf
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    References listed on IDEAS

    as
    1. Devadas,Sharmila & Loayza,Norman V., 2018. "When is a Current Account Deficit Bad?," Research and Policy Briefs 130415, The World Bank.
    2. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2012. "External adjustment and the global crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 252-265.
    3. Ca’ Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2012. "Thousands of models, one story: Current account imbalances in the global economy," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1319-1338.
    4. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-247, July-Sept.
    5. Michal Andrle, 2013. "What Is in Your Output Gap? Unified Framework & Decomposition into Observables," IMF Working Papers 2013/105, International Monetary Fund.
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