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Structural current account benchmarks for the European Union countries: cross-section exploration

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  • Kamila Kuziemska-Pawlak

    (Narodowy Bank Polski)

  • Jakub Mućk

    (Narodowy Bank Polski)

Abstract

This paper provides an empirical investigation of the medium- to long- term (structural) determinants of current account to GDP ratio. Cross-section regressions are run on the data for a large group of countries (94 economies) averaged over the period 2008-2016. The traditional set of factors explaining the current account is extended with the level of price-cost competitiveness proxied by national price level. The link between the national price level and the current account proves to be of a non-linear nature and depend on the level of economic development. Based on a battery of estimates, structural current accounts are calculated and compared with actual current accounts for 28 EU countries. In the aftermath of the crisis that escalated in 2008, narrowing gaps between actual and structural current accounts were observed in many EU deficit countries. On the other hand, large positive current account gaps persisted in surplus countries. Decomposition of changes in structural current account since 1995, conducted for the subset of the EU Member States for which the data were available, indicates that the changes in structural current account were mainly driven by the changes in income and the changes in general government balance.

Suggested Citation

  • Kamila Kuziemska-Pawlak & Jakub Mućk, 2019. "Structural current account benchmarks for the European Union countries: cross-section exploration," NBP Working Papers 320, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:320
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    References listed on IDEAS

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    Cited by:

    1. Comunale, Mariarosaria, 2022. "A panel VAR analysis of macro-financial imbalances in the EU," Journal of International Money and Finance, Elsevier, vol. 121(C).
    2. Ramona Tiganasu & Gabriela Carmen Pascariu & Dan Lupu, 2022. "Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 667-698, September.

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    More about this item

    Keywords

    determinants of current account; current account thresholds; crosssection estimation; panel data estimation;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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