Published in:Banco de España Research Paper ; No. WP-0638
Extent:
1 Online-Ressource (47 p)
Language:
English
DOI:
10.2139/ssrn.957556
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 01/15/2007 erstellt
Description:
This paper uses an intertemporal model of the current account to evaluate the fluctuations in current account balances experienced by Euro area countries over the last three decades. In the model current account balances are used to smooth consumption and they are driven by expectations about future income and relative prices. This simple model is not rejected for six (Belgium, France, Italy, Netherlands, Portugal, and Spain) of the ten Euro area countries examined, although the model tends to underestimate their current account volatility. The analysis also shows that the relative contributions to current account balances of future output and relative prices differ across countries. Expectations of future growth increased in all Southern European countries at the creation of the Euro but they had considerably diverged by 2005. While in Portugal these expectations are now below its historical mean, in Spain they are at a historical high