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An Assessment of the Current Account Sustainability in Romania – An Inter-temporal Perspective

  • Dumitru, Ionut

    ()

    (Academy of the Economic Studies Bucharest)

  • Dumitru, Ionela

    ()

    (Academy of the Economic Studies Bucharest.)

This paper assesses the sustainability of the CA deficit in Romania by estimating its structural component, based on an inter-temporal perspective. Using a large sample of panel data, we estimated long term relationships for the CA deficit and its fundamentals. The main conclusion of the paper is that there is an excessive CA deficit which should be adjusted. The results are showing that the structural CA could range 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 deficit in Romania, as well for other transition countries of Europe, are the economic convergence factors.

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File URL: http://www.ipe.ro/rjef/rjef2_09/rjef2_09_2.pdf
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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): 6 (2009)
Issue (Month): 2 (June)
Pages: 23-41

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Handle: RePEc:rjr:romjef:v:6:y:2009:i:2:p:23-41
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  1. Milesi-Ferretti, Gian Maria & Razin, Assaf, 1998. "Current Account Reversals and Currency Crises: Empirical Regularities," CEPR Discussion Papers 1921, C.E.P.R. Discussion Papers.
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  11. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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  17. International Monetary Fund, 2007. "Vulnerabilities in Emerging Southeastern Europe—How Much Cause for Concern?," IMF Working Papers 07/236, International Monetary Fund.
  18. 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 2005,41, Deutsche Bundesbank, Research Centre.
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