engleski

Testing the convergence of current account balance in selected EU countries before and after the introduction of the euro

The paper addresses the non-functioning of the European Monetary Union (EMU) as an optimal currency area, resulting in an increase in inequality among the member states. One of the indicators is the growing deficits of the current account balance in some and surpluses in the other EMU countries. The aim of this paper is to determine whether the accession to EMU had an impact on the current account balance of the EMU countries and convergence patterns of current account balances between them. The paper employs unit root testing methodology to test the convergence of the current account balance among EMU countries after the introduction of euro. In order to determine if EMU accession impacted the current account balance and its convergence pattern to the EMU average, structural breaks testing is employed. Total number and location(s) of structural break(s) are estimated endogenously. This analysis is interesting because it provides an information on impacts of EMU accession for the each of the analyzed countries. Data used in the analysis is the seasonally adjusted quarterly current account balance as the percentage of GDP. The period covered in analysis is from 1995q1 to 2016q2. Results indicate that there is no convergence among the EMU countries and that EMU accession had a significant role in the current account balance trends of the analyzed EMU countries.

current account ; EMU ; convergence ; unit root ; structural breaks

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