Prague Economic Papers 2006, 15(3):243-267 | DOI: 10.18267/j.pep.287

How Excessive are External Imbalances in Selected Transition Countries?

Aleksander Aristovnik1, Stanka Setnikar-Cankar
1 University of Ljubljana, Faculty of Administration, Department of Economics and Public Sector Management, Gosarjeva ul. 5, 1000 Ljubljana, Slovenia (aleksander.aristovnik@fu.uni-lj.si).

This article examines the main current account balance determinants in order to assess the potential excessiveness of current account deficits in selected transition countries. For this purpose, dynamic panel-regression techniques are used to characterise the properties of current account variations across the transition regions. The results are chiefly consistent with the theoretical and previous empirical analysis, indicating a moderate level of current account deficits persistency and negative effects of economic growth, real appreciation and worsening of terms of trade on the external balances. Furthermore, the validity of the stages of development hypothesis and twin deficit hypothesis, as well as the significance of demographic factors is confirmed in the regions. Finally, the results suggest that most transition countries are justified in running relatively high current account deficits.

Keywords: transition, current account deficits, excessiveness, determinants, dynamic panel data
JEL classification: C33, F32

Published: January 1, 2006  Show citation

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Aristovnik, A., & Setnikar-Cankar, S. (2006). How Excessive are External Imbalances in Selected Transition Countries? Prague Economic Papers, 15(3), 243-267. doi: 10.18267/j.pep.287
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