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The Determinants & Excessiveness of Current Account Deficits in Eastern Europe & the Former Soviet Union

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  • Aristovnik, Aleksander

Abstract

The article investigates the main factors of current account deficits in order to assess the potential excessiveness of current account deficits in selected countries of Eastern Europe and former Soviet Union. According to the simulated benchmark calculated on the basis of selected determinants (in period 1992-2003), the results confirm that the actual current account balances are generally close to their estimated levels in the 2000-2003 period in the transition region. This notion is in line with the intertemporal approach to the current account balance, suggesting that higher external deficits are a natural outcome when permanent domestic output exceeds the current one and when current investments and government consumption exceed their permanent levels. Hence, the results suggest that most countries in Eastern Europe and former Soviet Union are justified in running relatively high current account deficits.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 483.

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Date of creation: 05 Jun 2006
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Publication status: Published in Transformations in Business & Economics 11.6(2007): pp. 32-52
Handle: RePEc:pra:mprapa:483

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Keywords: transition countries; current account deficits; excessiveness; determinants; dynamic panel data;

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Cited by:
  1. Michele Ca' Zorzi & Alexander Chudik & Alistair Dieppe, 2011. "Thousands of models, one story: current account imbalances in the global economy," Globalization and Monetary Policy Institute Working Paper 100, Federal Reserve Bank of Dallas.
  2. Milan Nedeljkovic & Branko Uroševic & Emir Zildžovic, 2012. "Jackknife Model Averaging of the Current Account Determinants," Working papers 23, National Bank of Serbia.
  3. Nikos Christodoulakis, 2009. "Ten Years of EMU: convergence, divergence and new policy priorities," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 22, Hellenic Observatory, LSE.
  4. Michele Ca’ Zorzi & Alexander Chudik & Alistair Dieppe, 2012. "And then current accounts (over)adjusted," Empirical Economics, Springer, vol. 43(1), pages 245-270, August.
  5. 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.
  6. Danica Unevska Andonova & Branimir Jovanovic, 2011. "Sustainability of the Macedonian Current Account," Working Papers, National Bank of the Republic of Macedonia 2011-06, National Bank of the Republic of Macedonia.

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