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A Note on the Current Account Sustainability of European Transition Economies

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  • Juan Carlos Cuestas

    () (Department of Economics, The University of Sheffield)

Abstract

This paper analyses the sustainability of the current accounts of a group of Central and Eastern European countries. Given the link between national savings (public and private) and investment, current account may yield stabilities in the former fundamental macroeconomic variables. Hence, this analysis is of paramount importance given the 2008-2011 debt crises faced by many European economies, and the addition of new EU countries to the EMU. By means of unit root tests and fractional integration it shows that, in general, the ratio of current account to gross domestic product is a stationary and mean reverting process, although in some cases shocks tend to have long lasting effects, implying that there is no evidence of a potential debt default in this group of countries.

Suggested Citation

  • Juan Carlos Cuestas, 2012. "A Note on the Current Account Sustainability of European Transition Economies," Working Papers 2012011, The University of Sheffield, Department of Economics.
  • Handle: RePEc:shf:wpaper:2012011
    as

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    File URL: http://www.shef.ac.uk/economics/research/serps/articles/2012_011.html
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    unit roots; fractional integration; current account; EU;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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