Current accounts dynamics in OECD and EU acceding countries - an intertemporal approach

Arbeitspapier

The paper extends the standard intertemporal model of the current account to include two important stylised facts: (1) the persistence of current account positions and (2) the relevance of the fiscal balance. Specifically, the paper derives a closed form solution for consumption in the presence of habit persistence and liquidity constraints, which allows us to obtain a dynamic model for the current account where fiscal deficits have an effect. The model is estimated for a panel of 33 countries, including the ten EU acceding countries and structural current account positions are derived. A parsimonious specification including relative income, relative investment and the fiscal balance explains well past current account developments. A key finding of the paper is that, from an intertemporal perspective, current accounts in most acceding countries are currently broadly in line with their structural current account positions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 311

Classification and Topics

• Classification: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; Open Economy Macroeconomics
• Subject: current account ; habit persistence ; liquidity constraints ; panel

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bussière, Matthieu ; Fratzscher, Marcel ; Müller, Gernot J.
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/152745
• Last update: 10.03.2025, 11:44 AM CET