Jackknife model averaging of the current account determinants

Abstract

This paper investigates the short to medium-term empirical relationships between the current account balances and a broad set of macroeconomic determinants in Serbia and selected CEE countries. Using novel model averaging techniques we focus the analysis to individual country’s data only. The results suggest that the model tracks the current account movements over the past decade quite well and captures its relative volatility. Signs and magnitudes of different coefficients indicate significant heterogeneity among countries providing empirical support for the country-level analysis

Current Account Deficits in the EU Candidate and Potential Candidate Countries: A Panel Analysis

“…Thus, the results confirm that those EU candidate and potential candidate countries with greater exposure to international trade tend to be more export-orientated. These results are in line with the findings of Chinn and Prasad (2003)) and Urošević, Nedeljković and Zildžović (2012).…”

“…A one-percentage point rise in GDP growth leads to 0.16 to 0.42 percentage point rise in the current account deficit. The obtained result is consistent with the theory that domestic economic growth increases the demand for foreign goods and services and consequently worsens the current account balance as well as with the previous empirical findings ( Chin and Prasad, 2003;Rahman, 2008;Urošević, Nedeljković and Zildžović, 2012) that real GDP growth negatively affects the current account balance.…”

“…We find a positive and statistically significant relationship between relative per capita income (RELGDP) and the current account balance which is in line with the findings of Chinn and Prasad (2003), Herrmann and Jochem (2005), Bussière, Fratzscher and Muller (2006)), Rahman (2008) and Urošević, Nedeljković and Zildžović, (2012). A per capita income of one per cent below the average of the EU-28 lowers the current account balance by approximately 0.02 to 0.2 percentage point.…”

“…The central government budget balance (BUDGET) has a positive, but an insignificant effect on CAB in most of the estimated models (except in OLS and FGLS) thus supporting the "twin deficits" hypothesis and previous empirical findings (Herrmann and Jochem, 2005;Chinn and Ito, 2007;Urošević, Nedeljković and Zildžović, 2012). The small net effect of the budgets deficit cannot be attributed to its size which in some countries is almost equal to the level of the current account deficit, but more to the fact that budget deficits in the analyzed EU candidate and potential candidate countries are predominantly financed by private savings.…”

Impact of government balance and exchange rate regime on current account during the economic cycle: evidence from CEE countries

“…For example, Aristovnik (2006b) considers that high current account deficits in the most of CEE countries were justified by the current income trailing the permanent income, while Rahman (2008) suggests that high pace of rising current deficits in the new member states relative to other developing countries can be attributed to the more developed financial markets. Some other studies that use country-by-country analysis of current account determinants also confirms positive impact of fiscal on current balance in selected CEE countries, like Urošević et al (2012) for Czech Republic, Hungary, Poland, Romania and Serbia, and Petrović (2014) only for Serbia, both studies using the jackknife averaging estimation. On the other side, some CEE country-specific analysis fail to find evidences in support of the twin divergence (Jošić andJošić, 2011, for Croatia, Obadić et al, 2014, for Bulgaria, Croatia, Poland and Romania).…”