Affiliation:
1. University of Dubrovnik , Dubrovnik , Croatia .
2. Faculty of Economics and Business , University of Zagreb , Zagreb , Croatia .
Abstract
Abstract
Due to negotiations on accession to the EU, the new EU member states from Central and Eastern Europe went through the financial opening. In the pre-crisis period followed by high liquidity in global markets, most of the EU new member states experienced rapid credit growth, which conditioned the appreciation of the exchange rate. External imbalances and vulnerabilities built up. Countries experienced deterioration in their current accounts. This paper investigates the link between financial openness, real effective exchange rate, financial crisis and current account balance within the Panel Auto-Regressive Distributed Lag (ARDL) framework for 11 new European Union members during the period from 1999 to 2016. The results obtained by the use of pooled mean group estimator (PMG) show that in the long run, financial openness has a significant negative impact on the current account balance. In the short run, crisis significantly influences the current account balance having a positive sign.
Reference37 articles.
1. Atoyan, R., Manning, J., & Rahman, J. (2013). Rebalancing: Evidence from Current Account Adjustment in Europe (SSRN Scholarly Paper ID 2247226). Social Science Research Network. https://papers.ssrn.com/abstract=2247226
2. Baimbridge, M., Litsios, I., Jackson, K., & Le, U.R. (2017). The Segmentation of Europe. The Relationship Between Current Account and Budget Deficits. Palgrave Macmillan, UK, London10.1057/978-1-137-59013-8
3. Beirne, J., Renzhi, N., & Volz, U. (2020). Persistent Current Account Imbalances: Are they Good or Bad for Regional and Global Growth? (China, People’s Republic of, Japan; Issue 1094). Asian Development Bank. https://www.adb.org/publications/persistent-current-account-imbalances-good-or-bad-regional-global-growth10.2139/ssrn.3544629
4. Bogdan, Ž., Cota, B. & Erjavec, N. (2017). Current account balance and export performances: evidence based on new EU countries. Zagreb international review of economics & business. Vol. 20 (2), pages 33-48.10.1515/zireb-2017-0016
5. Borio, C. E. V., & Disyatat, P. (2015). Capital Flows and the Current Account: Taking Financing (More) Seriously (SSRN Scholarly Paper ID 2676714). Social Science Research Network. https://papers.ssrn.com/abstract=2676714