DETERMINANTS OF THE CURRENT ACCOUNT IN THE EU AND PIIGS

Natalya Ketenci, Idil Uz Akdogan, Hatice Kerra Geldi

Abstract


This paper investigates the relationship between current account balance and national savings, investment,budget deficit, and real exchange rate. Thesedeterminants of the current account are studied empirically byapplying the Generalized Method of Moments for a sample of 24 European countries. The sample data are divided into three different groups, PIIGS, EU-PIIGS, and EU in order to study the group-specific estimations. The main result of the paper is that the determinants of our model are capable of accurately explaining past movements in current accounts for all selected groups. Additionally, current account determinants in the economically weak members, PIIGS, behave slightly differently from the rest of the EU.


Keywords


Current Account; European Union; Generalized Method of Moments

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