Beyond the balance: An intertemporal perspective on the current accounts of OECD countries

Stojkov, Aleksandar and Warin, Thierry and Kjosevski, Jordan (2026) Beyond the balance: An intertemporal perspective on the current accounts of OECD countries. ACTA OECONOMICA, 76 (3). pp. 402-429. ISSN 0001-6373

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Abstract

This paper examines the structural determinants of external current account imbalances in OECD countries within a dynamic intertemporal framework. The study distinguishes between liquidity-constrained non-Ricardian consumers and fully optimizing Ricardian consumers. It uses panel data for 38 OECD economies and estimates current account dynamics with fixed-effects models using Driscoll-Kraay standard errors, supported by system GMM robustness checks. The findings show strong persistence in current account balances. Fiscal balances and changes in net output are positively associated with current account positions, while relative investment is consistently negative. The results are also consistent with the view that habit persistence and liquidity constraints matter for current account dynamics. Relative income and relative government consumption provide weaker and less stable evidence. The results suggest that external adjustment in OECD countries is gradual and shaped by fiscal policy, investment behavior, output dynamics, and consumption-smoothing constraints. Future research should refine intertemporal current account models by incorporating endogenous risk premia, capital market segmentation, and macroprudential policy channels.

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