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Decomposing and analysing the determinants of current accounts’ cyclicality : evidence from the Euro Area
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Orientador(es)
Resumo(s)
In this paper, we decompose the current account (CA) balance in 19 Euro area countries into cyclical
and non-cyclical components. For the period 1999:Q1 to 2015:Q4, we compute income elasticities of
imports and of exports via an alternative novel and improved approach by running time-varying
coefficient models country-by-country. Then, in a panel set-up (and controlling for country-invariant
characteristics), we uncover that terms of trade have a positive effect on both the cyclical and noncyclical
components of the CA, while the Global Financial Crisis, compensation of employees and
the employment level have a negative effect on the cyclical component. Moreover, the crisis had a
greater impact on the cyclical component of the CA due to movements in the real effective exchange
rate. In addition, we find a negative effect of the crisis on the cyclical component of the CA for
countries that received financial assistance from the European Union, notably Ireland, Portugal, Spain
and Latvia.
Descrição
Palavras-chave
current account cyclicality financial markets time-varying coefficients
Contexto Educativo
Citação
Afonso, António e João Jalles (2018). "Decomposing and analysing the determinants of current accounts’ cyclicality : evidence from the Euro Area". Instituto Superior de Economia e Gestão – REM Working paper nº 042 - 2018
Editora
ISEG - REM - Research in Economics and Mathematics