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O evaluare a sustenabilitatii deficitului de cont curent in Romania
[An assessment of the current account sustainability in Romania]

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  • Dumitru, Ionut

Abstract

This paper assesses the sustainability of the CA deficits in the New Member States (NMS) of European Union by estimating its structural component based on fundamentals. Using a large sample of panel data, we estimated long term relationships for the CA deficit and its fundamentals using two methods from the literature. The main conclusion of the paper is that in some countries there is an excessive CA deficit which should be adjusted. In the case of Romania, the results are showing that the structural CA could be between 6.3% and 10.9% of GDP, depending on the model used and the econometric procedure. Another important result of the paper is that the main drivers of the CA deficits in NMS are the economic convergence factors.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18614.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:18614

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Keywords: structural CA deficit; convergence; relative income; Ricardian equivalence;

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References

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  1. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, Elsevier, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799 Elsevier.
  2. Menzie D. Chinn & Hiro Ito, 2005. "Current Account Balances, Financial Development and Institutions: Assaying the World "Savings Glut"," NBER Working Papers 11761, National Bureau of Economic Research, Inc.
  3. Asli Demirgüç-Kunt & Enrica Detragiache, 2005. "Cross-Country Empirical Studies of Systemic Bank Distress: A Survey," IMF Working Papers, International Monetary Fund 05/96, International Monetary Fund.
  4. Paolo Zanghieri, 2004. "Current Accounts Dynamics in new EU members: Sustainability and Policy Issues," Working Papers, CEPII research center 2004-07, CEPII research center.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2004. "Current accounts dynamics in OECD and EU acceding countries - an intertemporal approach," Working Paper Series, European Central Bank 0311, European Central Bank.
  7. G. Russell Kincaid & Martin Fetherston & Peter Isard & Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers, International Monetary Fund 209, International Monetary Fund.
  8. Daniel Leigh & Abdul Abiad & Ashoka Mody, 2007. "International Finance and Income Convergence," IMF Working Papers, International Monetary Fund 07/64, International Monetary Fund.
  9. Jesmin Rahman, 2008. "Current Account Developments in New Member States of the European Union," IMF Working Papers, International Monetary Fund 08/92, International Monetary Fund.
  10. 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, Deutsche Bundesbank, Research Centre 2005,41, Deutsche Bundesbank, Research Centre.
  11. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, Elsevier, vol. 26(4), pages 500-522, June.
  12. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 18(1), pages 47-82, January.
  13. 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, Elsevier, vol. 59(1), pages 47-76, January.
  14. Aleksander Aristovnik, 2008. "Short-Term Determinants of Current Account Deficits: Evidence from Eastern Europe and the Former Soviet Union," Eastern European Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 46(1), pages 24-42, January.
  15. Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? a Cross-Sectional and Panel Approach," IMF Working Papers, International Monetary Fund 96/58, International Monetary Fund.
  16. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
  17. International Monetary Fund, 2008. "Romania," IMF Staff Country Reports, International Monetary Fund 08/210, International Monetary Fund.
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Cited by:
  1. NEGREA Adrian & HATEGAN D.B. Anca, 2010. "The Current Account Deficit And The Fixed Exchange Rate. Adjusting Mechanisms And Models," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 73-77, July.

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