Current account in the peripherial members of the European Union: Panel analysis

• Main Author: Kovačević Radovan
• Format: Article
• Language: English
• Published: Association of Serbian Banks 2018-01-01
• Series: Bankarstvo
• Subjects: current account; peripheral eurozone members; cointegration; unit root test; real effective exchange rate; net foreign assets; foreign direct investment
• Online Access: https://scindeks-clanci.ceon.rs/data/pdf/1451-4354/2018/1451-43541804014K.pdf

This paper examines the correlation between the current account balance of peripheral eurozone members (Italy, Spain, Portugal, Ireland and Greece) and the main determinants that define it for the period 2000-2017. The research was carried out by means of panel methodology. The current account balance is a dependent variable, and a set of selected relevant explanatory macroeconomic variables represents the panel regressors. Since the panel time series had a single root, cointegration tests were conducted. Since the results of these tests confirmed the existence of cointegration between the panel time series, the cointegration regression equation was estimated. For this assessment, FMOLS and DOLS estimators were applied. The estimated coefficients of cointegration regressors using FMOLS estimators are statistically significant for the entire period 2000-2017. The only exception at the level of the starting equation is the FMOLS estimation of the parameter with remittances, which is not statistically significant. In the case of the application of the DOLS estimator, several estimated parameters did not show significance. The signs in front of the parameter estimates generally agree with the theoretical approach. The estimated parameters show long-term compliance of the current account balance and selected macroeconomic regressors. The obtained findings confirm the persistence of the current account balance in peripheral eurozone members.