Český finanční a účetní časopis 2020(1):5-26 | DOI: 10.18267/j.cfuc.541

Context of external economic imbalances adjustments and long-term economic growth

Jiří Pour
Jiří Pour; Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví, katedra měnové teorie a politiky, nám. W. Churchilla 4, 130 67 Praha 3

Theoretically, external economic imbalance can be seen as an issue of chronic over-investment or under-saving of economies, and the process of correction may therefore be interpreted as a systematic movement of the national saving and investment rates towards their long-term equilibrium values. Such movement can be captured as a structural break in time series. We tried to empirically verify the long-term effects of the external imbalances adjustments on economic growth - namely whether structural breaks in the trend of relevant variables are related to the occurrence of structural breaks in GDP trend. The results suggest that the long-term adjustments of external economic imbalances are associated with a higher probability of negative GDP-trend breaks. However, no one-way causal effect was identified.

Keywords: External economic imbalance; Current account reversal; Savings; Investment; Structural breaks.
JEL classification: E21, E22, F32

Received: March 10, 2020; Revised: April 23, 2020; Accepted: April 23, 2020; Prepublished online: June 28, 2020; Published: June 29, 2020  Show citation

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Pour, J. (2020). Context of external economic imbalances adjustments and long-term economic growth. Czech Financial and Accounting Journal, 2020(1), 5-26. doi: 10.18267/j.cfuc.541
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