Policy seminar: The grand divergence: global and European current account surplusses

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Zsolt Darvas (Bruegel)

Discussant: Ona Ciocyte (CPB)

Language: English

Registration:  Please register here.

Abstract subject:
Global current account imbalances widened before the 2007/2008 crisis and have narrowed since. While the post-crisis adjustment of European current account deficits was in line with global developments (though more forceful), European current account surpluses defied global trends and increased. We use panel econometric models to analyse the determinants of medium-term current account balances. Our results confirm that higher fiscal balances, higher GDP per capita, more rapidly aging populations, larger net foreign assets, larger oil rents and better legal systems increase the medium-term current account balance, while a larger growth differential and a higher old-age dependency ratio reduce it. European current account surpluses became excessive during the past twelve years according to our estimates, while they were in line with model predictions in the preceding three decades. Generally, the gap between the actual current account and its fitted value in the model has a strong predictive power for future current account changes. Excess deficits adjust more forcefully than excess surpluses. However, in the 2004-07 period, excess imbalances were amplified, which was followed by a forceful correction in 2008-15, with the exception of European surpluses.

Policy seminars
CPB organises policy seminars for policy makers, researchers and other stakeholders. These policy seminars focus on policy implications. Policy seminars are held on Thursday from 1.00 pm. to 2.00 pm.

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CPB also organises seminars for researchers. During these seminars, always held on Tuesday from 1.00 pm. to 2.00 pm., academic papers are presented and discussed.

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