2022 Update of the External Balance Assessment Methodology

68 Pages Posted: 15 Mar 2023

See all articles by Cian Allen

Cian Allen

International Monetary Fund (IMF)

Camila Casas

International Monetary Fund (IMF)

Giovanni Ganelli

International Monetary Fund (IMF) - Fiscal Affairs Department

Luciana Juvenal

International Monetary Fund (IMF)

Daniel Leigh

International Monetary Fund (IMF); International Monetary Fund (IMF)

Pau Rabanal

International Monetary Fund

Cyril Rebillard

International Monetary Fund (IMF)

Jair Rodriguez

International Monetary Fund (IMF)

João Tovar Jalles

University of Lisbon; International Monetary Fund (IMF); Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE)

Abstract

The assessment of external positions and exchange rates of member countries is a key mandate of the IMF. The External Balance Assessment (EBA) methodology has provided the framework for conducting external sector assessments by Fund staff since its introduction in 2012. This paper provides the latest version of the EBA methodology, updated in 2022 with additional refinements to the current account and real exchange rate regression models, as well as updated estimates for other components of the EBA methodology. The paper also includes an assessment of how estimated current account gaps based on EBA are associated with future external adjustment.

Keywords: Current accounts, exchange rates, external sustainability, external sector assessments, global imbalances, OECD product market, EBA gaps adjustment, EBA current account model, EBA REER, labor market rigidity, External balance assessment (EBA), Real effective exchange rates, Current account, Current account balance, Real exchange rates, Global

JEL Classification: F21, F31, F32, F41, F42, G15, O16, O24

Suggested Citation

Allen, Cian and Casas, Camila and Ganelli, Giovanni and Juvenal, Luciana and Leigh, Daniel and Leigh, Daniel and Rabanal, Pau and Rebillard, Cyril and Rodriguez, Jair and Jalles, João Tovar, 2022 Update of the External Balance Assessment Methodology. IMF Working Paper No. 2023/047, Available at SSRN: https://ssrn.com/abstract=4389365 or http://dx.doi.org/10.5089/9798400235412.001

Cian Allen (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Camila Casas

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Giovanni Ganelli

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Luciana Juvenal

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Daniel Leigh

International Monetary Fund (IMF) ( email )

700 19th Street, NW
Washington, DC 20431
United States

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Pau Rabanal

International Monetary Fund ( email )

700 19th Street NW
Washington, DC 20431
United States

Cyril Rebillard

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jair Rodriguez

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

João Tovar Jalles

University of Lisbon ( email )

R. Branca Edmée Marques
Dept. Plant Biology
Lisboa, 1600-276
Portugal

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE)

Rua Miguel Lupi, 20
Lisboa, 1200-781
Portugal

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