Structural current accounts in the European Union countries: cross-sectional exploration |
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| Institution: | 1. Narodowy Bank Polski, Poland;2. University of Lodz, Poland;1. China Economics and Management Academy, Central University of Finance and Economics, No. 39 South College Road, Haidian District, 100081 Beijing, China;2. School of Finance, Jiangxi University of Finance and Economics, Nanchang, China;3. School of Economics, Jiangxi University of Finance and Economics, Nanchang, 330013, China;1. Aletheia University, Taiwan;2. National Taichung University of Science and Technology, Taiwan;1. Faculty of Economics, Chuo University, Japan;2. Graduate School of Economics, Kyoto University, Japan;1. IMUVa, Universidad de Valladolid, Spain;2. Universidad de Murcia, Spain;1. University of Milano, Bicocca and CefES, Italy;2. University of Pavia, Griffith University and CefES, Italy |
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| 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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| Keywords: | Current account Structural current account Real exchange rate Cross-sectional estimation European current account imbalances F31 F32 F41 |
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