This paper investigates the relationships between the current account and several fundamentals, including the real exchange rate, government consumption, investment, openness, terms of trade and real income in the EU28 group of countries. A main feature of the study is that we also assess the relationships for two subgroups, the EU15 + Cyprus and Malta, and the CEECs. Using data spanning 1995q1 and 2019q2, we identify similarities and differences between the responses in these two subgroups which are obscured when an aggregate study of the EU28 is conducted, rather than the sub-groups. Our results suggest that, in assessing the current account for economic blocs, an a priori assumption of similar relationships for member countries may be misplaced.
Funding
MINEIC-AEI-FEDER ECO2017- 85503-R and ECO2017-83255-C3-3-P projects both of them from ‘Ministerio de Economía, Industria y Competitividad’ (MINEIC), `Agencia Estatal de Investigación' (AEI) Spain and `Fondo Europeo de Desarrollo Regional' (FEDER)
This paper was accepted for publication in the journal Economic Systems and the definitive published version is available at https://doi.org/10.1016/j.ecosys.2021.100870.