The Impact of Productivity on Current Account in Central Europe Countries

AbstractThe paper investigates the current account behavior in respect of productivity shocks. The model presented in the paper is based on the model of Glick and Rogoff. These authors distinguish global and country specific productivity. The quarterly data from Eurostat database are used as a data source. Central Europe countries were chosen as a sample of countries in the period of time from 1995 to 2013. The model predicts negative impact of country productivity shock on current account if the shock is permanent. The reason of this conclusion is consumption smoothing of agents in the economy. The regression presented in this paper does not give clear results about country specific productivity shock as the expected sigh was detected only in the case of Poland and Austria. Global productivity has insignificant impact on current account as the model predicts. The model also predicts lower effect of country specific productivity shock on investments in comparison with current account. But the results from regression give the opposite conclusion as well as in Glick and Rogoff contribution