An assessment of the current account sustainability in Romania

Dumitru, Ionut (2008): An assessment of the current account sustainability in Romania.

Abstract

This paper assesses the sustainability of the CA deficits in the New Member States (NMS) of European Union by estimating its structural component based on fundamentals. Using a large sample of panel data, we estimated long term relationships for the CA deficit and its fundamentals using two methods from the literature. The main conclusion of the paper is that in some countries there is an excessive CA deficit which should be adjusted. In the case of Romania, the results are showing that the structural CA could be between 6.3% and 10.9% of GDP, depending on the model used and the econometric procedure. Another important result of the paper is that the main drivers of the CA deficits in NMS are the economic convergence factors.

• Item Type: MPRA Paper
• Language: English
• Keywords: structural CA deficit, convergence, relative income, Ricardian equivalence
• Subjects: F - International Economics > F1 - Trade > F15 - Economic Integration; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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