Sustainability of the Macedonian Current Account
AbstractMost of the emerging European countries, including Republic of Macedonia, are faced with greater or smaller current account deficits, which raise the concern about their sustainability in the long run. This working paper examines the sustainability of the Macedonian current account deficit using the structural model of the current account. According to this model, the current account is viewed as the outcome of variations in macroeconomic “structural” determinants that influence the saving-investment balance. The results show that budget deficit, economic growth, FDI and financial intermediation are the variables that had an effect on the Macedonian current account in the period 1998-2009, and that the sustainable level of the current account deficit is in the range of 5.3%-9.1% of GDP. The current account deficit was fluctuating around this sustainable level most of the time, which indicates that external equilibrium was not jeopardized. However, in the period between the last quarter of 2007 and the first quarter of 2009, due to the two external shocks in this period (the global increase of prices and the global recession), the current account deficit was higher than the sustainable level, which suggested a violation of the external equilibrium. Although the equilibrium was restored later in 2009, this historical episode points out the need for structural reforms in the Macedonian economy in order to avoid repeating such episodes in the future.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bank of the Republic of Macedonia in its series Working Papers with number 2011-06.
Length: 38 pages
Date of creation: Jun 2011
Date of revision:
current account; sustainability; structural model; saving and investment; external equilibrium; Macedonia;
Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wickens, M. R. & Uctum, Merih, 1993. "The sustainability of current account deficits : A test of the US intertemporal budget constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 17(3), pages 423-441, May.
- Aristovnik, Aleksander, 2006.
"The Determinants & Excessiveness of Current Account Deficits in Eastern Europe & the Former Soviet Union,"
483, University Library of Munich, Germany.
- Aleksander Aristovnik, 2006. "The Determinants & Excessiveness of Current Account Deficits in Eastern Europe & the Former Soviet Union," William Davidson Institute Working Papers Series wp827, William Davidson Institute at the University of Michigan.
- Adalbert Winkler, 2009. "Southeastern Europe: Financial Deepening, Foreign Banks and Sudden Stops in Capital Flows," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 84-97.
- Dimitris K. Christopoulos & Miguel León-Ledesma, 2004.
"Current Account Sustainability in the US: What Do We Really Know About It?,"
Studies in Economics
0412, Department of Economics, University of Kent.
- Christopoulos, Dimitris & León-Ledesma, Miguel A., 2010. "Current account sustainability in the US: What did we really know about it?," Journal of International Money and Finance, Elsevier, vol. 29(3), pages 442-459, April.
- Paolo Zanghieri, 2004. "Current Accounts Dynamics in new EU members: Sustainability and Policy Issues," Working Papers 2004-07, CEPII research center.
- Arratibel, Olga & Furceri, Davide & Martin, Reiner, 2008. "Real convergence in Central and Eastern European EU Member States: which role for exchange rate volatility?," Working Paper Series 0929, European Central Bank.
- Aristovnik, Aleksander, 2007.
"Short- and medium-term determinants of current account balances in Middle East and North Africa countries,"
1974, University Library of Munich, Germany.
- Aleksander Aristovnik, 2007. "Short- And Medium-Term Determinants Of Current Account Balances In Middle East And North Africa Countries," William Davidson Institute Working Papers Series wp862, William Davidson Institute at the University of Michigan.
- Ca' Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2009. "Current account benchmarks for central and eastern Europe: a desperate search?," Working Paper Series 0995, European Central Bank.
- David H. Howard, 1989. "Implications of the U.S. current account deficit," International Finance Discussion Papers 350, Board of Governors of the Federal Reserve System (U.S.).
- Sabine Herrmann & Adalbert Winkler, 2009.
"Financial markets and the current account: emerging Europe versus emerging Asia,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 145(3), pages 531-550, October.
- Herrmann, Sabine & Winkler, Adalbert, 2008. "Financial markets and the current account: emerging Europe versus emerging Asia," Discussion Paper Series 1: Economic Studies 2008,05, Deutsche Bundesbank, Research Centre.
- Jordi Prat & Leandro Medina & Alun H. Thomas, 2010. "Current Account Balance Estimates for Emerging Market Economies," IMF Working Papers 10/43, International Monetary Fund.
- Hanan Morsy, 2010.
"Current Account Determinants For Oil-Exporting Countries,"
511, Economic Research Forum, revised Mar 2010.
- Hanan Morsy, 2009. "Current Account Determinants for Oil-Exporting Countries," IMF Working Papers 09/28, International Monetary Fund.
- Howard, David H, 1989. "Implications of the U.S. Current Account Deficit," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 153-65, Fall.
- Jesmin Rahman, 2008. "Current Account Developments in New Member States of the European Union," IMF Working Papers 08/92, International Monetary Fund.
- Aristovnik, Aleksander, 2006. "How sustainable are current account deficits in selected transition economies?," MPRA Paper 485, University Library of Munich, Germany.
- Danica Unevska Andonova & Marija Petkovska, 2011. "The transmission of external shocks to the Macedonian economic activity," Working Papers 2011-03, National Bank of the Republic of Macedonia.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jovica Mitik).
If references are entirely missing, you can add them using this form.