Work detail

Current account adjustment in the Baltic countries

Author: Bc. David Vostřák
Year: 2014 - summer
Leaders: doc. Mgr. Tomáš Holub Ph.D.
Work type: Bachelors
Language: English
Pages: 55
Awards and prizes: B.A. with distinction from the Dean of the Faculty of Social Sciences for an extraordinarily good bachelors diploma thesis.
Abstract: In last twenty years, the Baltic countries have experienced turbulent develompents of their current
accounts. Deficits on these accounts were often substantially above 10% of GDP and there was active
discussion about their sustainibility. We will look in this work on the developments of the current
accounts both from practical and theoretical point of view. The later is made with usage of an
intertemporal model of representative agent, who maximazes his utility by optimizing his consumption
profile over infinite time horizon. This model is then used in empirical part, where we compare
estimated values of the current accounts with their real values. We assume that expectations about future
values of key variables are realized by following the vector autoregression of order one. The results of
this work suggest that big deficits in past were caused by high expectations about growth rates of the
economies. Decreasing of this expectations then resulted in the adjustments of the current accounts


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