Long-Run Drivers of Current Account Imbalances in the EU: The Role of Trade Openness

Bari SERIES Working Papers, N. 03/2016

29 Pages Posted: 21 May 2016

See all articles by Giuseppe Caivano

Giuseppe Caivano

Università degli Studi di Bari “Aldo Moro” (UNIBA)

Nicola D. Coniglio

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods

Date Written: May 1, 2016

Abstract

This paper investigates, using panel cointegration methods, the long-run drivers of current account imbalances in 15 EU member States during the period 1974-2011. We argue that the degree of trade openness greatly affects the relative strength of the different long-term drivers of current account imbalances. Our empirical results indicate that competitiveness factors strongly affect imbalances in countries with a low trade openness, while the effects weakens as trade openness increases. Similarly, we find evidence of a positive effects of government debt on current account deficits for high openness countries and a negative impact for medium and low openness countries. Our results suggest that the structural heterogeneity in the degree of openness across EU countries might be an important contributor to the diverging patterns in current account balances experienced in the last decades.

Keywords: Current account imbalances; panel cointegration; trade openness

JEL Classification: F32, F41

Suggested Citation

Caivano, Giuseppe and Coniglio, Nicola D., Long-Run Drivers of Current Account Imbalances in the EU: The Role of Trade Openness (May 1, 2016). Bari SERIES Working Papers, N. 03/2016, Available at SSRN: https://ssrn.com/abstract=2781929 or http://dx.doi.org/10.2139/ssrn.2781929

Giuseppe Caivano (Contact Author)

Università degli Studi di Bari “Aldo Moro” (UNIBA) ( email )

Piazza Umberto I
Bari, 70121
Italy

Nicola D. Coniglio

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods ( email )

Largo Abbey St. Scholastica
Bari, 70124
Italy

HOME PAGE: http://www.dse.uniba.it/Corsi/docenti/Coniglio/Nicola_paginaWeb.htm

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
42
Abstract Views
338
PlumX Metrics