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Understanding the Euro Area Current Account

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  • Galstyan, Vahagn

    (Central Bank of Ireland)

Abstract

Adopting a savings-investment approach to the current account, I link the euro area current account to a set of factors that have been identified as reliable covariates in the literature. The results suggest that corporate net lending and the fiscal balance are important covariates of the euro area current account. On the other hand, while demographic factors also matter, their relevance is of second order.

Suggested Citation

  • Galstyan, Vahagn, 2019. "Understanding the Euro Area Current Account," Economic Letters 7/EL/19, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:7/el/19
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    File URL: https://www.centralbank.ie/docs/default-source/publications/economic-letters/vol-2019-no-7-understanding-the-euro-area-current-account-(galstyan).pdf?sfvrsn=8
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    References listed on IDEAS

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    1. 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, vol. 59(1), pages 47-76, January.
    2. Maurice Obstfeld, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 251-270.
    3. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca A Ricci & Gian M Milesi-Ferretti, 2008. "Exchange Rate Assessments; CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
    4. Allen, Cían, 2019. "Revisiting external imbalances: Insights from sectoral accounts," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 67-101.
    5. Persson, Torsten & Svensson, Lars E O, 1985. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 43-65, February.
    6. Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-369, May.
    7. Steven T Phillips & Luis Catão & Luca A Ricci & Rudolfs Bems & Mitali Das & Julian Di Giovanni & Filiz D Unsal & Marola Castillo & Jungjin Lee & Jair Rodriguez & Mauricio Vargas, 2013. "The External Balance Assessment (EBA) Methodology," IMF Working Papers 13/272, International Monetary Fund.
    8. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2002. "The Importance of Bequests and Life-Cycle Saving in Capital Accumulation: A New Answer," American Economic Review, American Economic Association, vol. 92(2), pages 274-278, May.
    9. Galstyan, Vahagn, 2019. "Factor Income and the Euro Area Current Account," Economic Letters 8/EL/19, Central Bank of Ireland.
    10. Mai Chi Dao & Chiara Maggi, 2018. "The Rise in Corporate Saving and Cash Holding in Advanced Economies: Aggregate and Firm Level Trends," IMF Working Papers 18/262, International Monetary Fund.
    11. Mai Chi Dao & Callum Jones, 2018. "Demographics, Old-Age Transfers and the Current Account," IMF Working Papers 18/264, International Monetary Fund.
    12. Catherine L. Mann, 2002. "Perspectives on the U.S. Current Account Deficit and Sustainability," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 131-152, Summer.
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    Cited by:

    1. Galstyan, Vahagn, 2019. "Inflation and the Current Account in the Euro Area," Economic Letters 4/EL/19, Central Bank of Ireland.
    2. Galstyan, Vahagn, 2019. "Factor Income and the Euro Area Current Account," Economic Letters 8/EL/19, Central Bank of Ireland.

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