Title: Current account determinants in a globalized world
Authors: Cecilio Tamarit - University of Valencia (Spain)
Mariam Camarero - University Jaume I (Spain)
Josep Lluis Carrion-i-Silvestre - Universitat de Barcelona (Spain) [presenting]
Abstract: Fresh evidence is presented on the long-term determinants of the current account overcoming some of the econometric flaws found in the previous empirical analysis as well as including the increasing importance of the financial integration for the adjustment of the current account. The intertemporal approach to the current account provides the underlying theoretical framework for this study. The sample contains eleven countries of the eurozone, ten developed non-European Union countries, and, finally, three emerging countries over the period 1972-2017. One distinctive feature of our single-equation-based analysis is the inclusion of foreign current accounts among the regressors as a way to capture the potential influence of the evolution of macroeconomic imbalances of other developed economies into the economy of interest. Using this information, it is possible to test the null hypothesis of weak cross-section dependence. The results show the distinctive importance of the usual variables with an increasing role of the dependence among countries in a globalized world.