Current Account Balance and Export Performances: Evidence Based on New EU Countries

Abstract

In this paper, we investigate whether the differences in the current account balance and export performances for a new EU countries are a result of exchange rate policies. The analysis shows that countries with a flexible exchange rate have better export performances and the current account balance in the pre-crisis period. The obtained results show that movements in the current account balance are mainly driven by domestic variables. In the countries with a flexible exchange rate, real and nominal depreciation affects export positively although the magnitude of these effects is tiny and limited to the crisis period. These results point to a higher significance of non-price competitiveness on export which should be a future research topic.