IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2008-092.html
   My bibliography  Save this paper

Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria

Author

Listed:
  • Jesmin Rahman

Abstract

This paper analyzes current account (CA) developments in the following 10 new EU members states: Czech Republic, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. During the last 15 years, these countries, on average, have run CA deficits that are considerably higher than the average CA deficit of other developing countries. However, more recently, a diverging pattern has emerged among these countries with one group, consisting of the Baltic countries, Bulgaria and Romania, experiencing rapid widening, while the others seeing a stabilization in their CA balances. Using panel data for 59 countries, this paper empirically investigates the following three questions: Are higher average deficits in EU-10 explained by medium-term macroeconomic fundamentals? What explains the diverging CA behavior among EU-10? And finally, how challenging is it for the group experiencing rapidly widening CA deficits to reverse the trend?

Suggested Citation

  • Jesmin Rahman, 2008. "Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria," IMF Working Papers 2008/092, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/092
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21882
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Philip Schellekens & Mr. Rudolfs Bems, 2007. "Finance and Convergence: What’s Ahead for Emerging Europe?," IMF Working Papers 2007/244, International Monetary Fund.
    2. Mr. Aasim M. Husain & Mr. Ashoka Mody & Nienke Oomes & Mr. Robin Brooks & Mr. Kenneth Rogoff, 2003. "Evolution and Performance of Exchange Rate Regimes," IMF Working Papers 2003/243, International Monetary Fund.
    3. Francesco Caselli & Silvana Tenreyro, 2006. "Is Poland the Next Spain?," NBER Chapters, in: NBER International Seminar on Macroeconomics 2004, pages 459-533, National Bureau of Economic Research, Inc.
    4. Wei, Shang-Jin & Chinn, Menzie David, 2008. "A Faith-based Initiative: Does a Flexible Exchange Rate Regime Really Facilitate Current Account Adjustment?," CEPR Discussion Papers 7076, C.E.P.R. Discussion Papers.
    5. Mr. G. Russell Kincaid & Mr. Martin Fetherston & Mr. Peter Isard & Mr. Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 2001/006, International Monetary Fund.
    6. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
    7. Aizenman, Joshua & Sun, Yi, 2010. "Globalization and the sustainability of large current account imbalances: Size matters," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 35-44, March.
    8. Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
    9. Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
    10. Mr. Daniel Leigh & Mr. Abdul d Abiad & Mr. Ashoka Mody, 2007. "International Finance and Income Convergence: Europe is Different," IMF Working Papers 2007/064, International Monetary Fund.
    11. Gian Maria Milesi-Ferretti & Assaf Razin, 1996. "Sustainability of Persistent Current Account Deficits," NBER Working Papers 5467, National Bureau of Economic Research, Inc.
    12. Herrmann, Sabine & Jochem, Axel, 2005. "Trade balances of the central and east European EU member states and the role of foreign direct investment," Discussion Paper Series 1: Economic Studies 2005,41, Deutsche Bundesbank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dumitru, Ionut & Dumitru, Ionela, 2009. "An Assessment of the Current Account Sustainability in Romania – An Inter-temporal Perspective," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(2), pages 23-41, June.
    2. Blaise Gnimassoun, 2014. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," Working Papers hal-04141342, HAL.
    3. Herrmann, Sabine & Winkler, Adalbert, 2009. "Real convergence, financial markets, and the current account - Emerging Europe versus emerging Asia," The North American Journal of Economics and Finance, Elsevier, vol. 20(2), pages 100-123, August.
    4. Issiaka Coulibaly & Blaise Gnimassoun, 2013. "Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?," Working Papers hal-04141160, HAL.
    5. Dumitru, Ionut, 2008. "O evaluare a sustenabilitatii deficitului de cont curent in Romania [An assessment of the current account sustainability in Romania]," MPRA Paper 18614, University Library of Munich, Germany.
    6. Rihab Bousnina & Foued Badr Gabsi, 2022. "Current Account Balance and Financial Development in MENA Countries: The Role of Institutions," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(1), pages 109-142, March.
    7. Dumitru, Ionut, 2008. "An assessment of the current account sustainability in Romania," MPRA Paper 18613, University Library of Munich, Germany.
    8. 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.
    9. repec:cuf:journl:y:2014:v:15:i:2:abiad:leigh:mody is not listed on IDEAS
    10. Arratibel, Olga & Furceri, Davide & Martin, Reiner & Zdzienicka, Aleksandra, 2011. "The effect of nominal exchange rate volatility on real macroeconomic performance in the CEE countries," Economic Systems, Elsevier, vol. 35(2), pages 261-277, June.
    11. Mariam Camarero & Josep Lluís Carrion‐i‐Silvestre & Cecilio Tamarit, 2021. "External imbalances from a GVAR perspective," The World Economy, Wiley Blackwell, vol. 44(11), pages 3202-3245, November.
    12. Joshua Aizenman & Yothin Jinjarak, 2009. "The Usa As The ‘Demander Of Last Resort’ And The Implications For China'S Current Account," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 426-442, August.
    13. Reinhardt, Dennis & Ricci, Luca Antonio & Tressel, Thierry, 2013. "International capital flows and development: Financial openness matters," Journal of International Economics, Elsevier, vol. 91(2), pages 235-251.
    14. Das, Debasish Kumar, 2012. "Determinants of current account imbalances in the global economy: A dynamic panel analysis," MPRA Paper 42419, University Library of Munich, Germany.
    15. Smith, Constance E., 2011. "External balance adjustment: An intra-national and international comparison," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1195-1213, October.
    16. Mr. Luis M. Cubeddu & Signe Krogstrup & Gustavo Adler & Mr. Pau Rabanal & Mai Dao & Mrs. Swarnali A Hannan & Luciana Juvenal & Ms. Carolina Osorio-Buitron & Cyril Rebillard & Mr. Daniel Garcia-Macia &, 2019. "The External Balance Assessment Methodology: 2018 Update," IMF Working Papers 2019/065, International Monetary Fund.
    17. Duncan, Roberto, 2015. "A threshold model of the US current account," Economic Modelling, Elsevier, vol. 48(C), pages 270-280.
    18. Sabine Herrmann & Adalbert Winkler, 2009. "Financial markets and the current account: emerging Europe versus emerging Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(3), pages 531-550, October.
    19. Gnimassoun, Blaise & Coulibaly, Issiaka, 2014. "Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?," Economic Modelling, Elsevier, vol. 40(C), pages 208-226.
    20. Antonis Adam & Panos Hatzipanayotou & Thomas Moutos, 2015. "Labour Market Regulation, Fiscal Consolidation, and the Success of Current Account Adjustments," DEOS Working Papers 1517, Athens University of Economics and Business.
    21. Ali, Amjad & Audi, Marc, 2023. "Analyzing the Impact of Foreign Capital Inflows on the Current Account Balance in Developing Economies: A Panel Data Approach," MPRA Paper 118173, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2008/092. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.