Current Account Dynamics in OECD Countries and in the New EU Member States: An Intertemporal Approach
AbstractThis paper investigates the large current account deficits observed in most new EU member states using an intertemporal model. The standard model is extended to include: (1) the persistence of current account positions and (2) the relevance of the fiscal balance. Specifically, a closed form solution for consumption in the presence of habit persistence and liquidity constraints is derived, yielding a dynamic model for the current account where fiscal deficits have an effect. The model is estimated for a panel of 33 countries. A key finding is that current accounts in most new EU member states are broadly in line with their structural current account positions.
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Bibliographic InfoArticle provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.
Volume (Year): 21 (2006)
Issue (Month): ()
Current account; Habit persistence; Liquidity constraints; Transition economies;
Find related papers by JEL classification:
- 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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- Ca’ Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2012.
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- Milan Nedeljkovic & Branko Uroševic & Emir Zildžovic, 2012. "Jackknife Model Averaging of the Current Account Determinants," Working papers 23, National Bank of Serbia.
- Ca' Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2012.
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- Michele Ca' Zorzi & Alexander Chudik & Alistair Dieppe, 2012. "The perils of aggregating foreign variables in panel data models," Globalization and Monetary Policy Institute Working Paper 111, Federal Reserve Bank of Dallas.
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