New evidence on the determinants of current accounts in the EU

Growing external imbalances in Europe have been recognised as an important aggravating element in searching for solutions out of the current crisis. This paper takes a closer look at the determinants of current accounts in the European economies. The standard set of the determinants discussed in the past literature is extended by factors that seem to have played an important role in Europe over the last decades. Such factors relate particularly to the dynamics of consumption and connected to this credit concession to the private sector, as well as to the increasingly preponderant presence of low-productive and non-tradeable construction activities in the economic structure. Additionally, the growth of per-capita output played a significant role in explaining current account positions. This evidence speaks in favour of the catching-up still going on within Europe.