The Effect of Selected Macroeconomic Indicators on the Current Account Balance: An Empirical Research for Spain

Year 2024, Volume: 11 Issue: 1, 152 - 168, 08.01.2024

Ayşe Özge Artekin

Abstract

This research examined the impact of oil prices and exchange rates on the current account balance for Spain between 1980 and 2022 in terms of the long-term relationship between them. According to results of Johansen, Engle-Granger, Phillips-Ouliaris cointegration tests, impulse response, variance decomposition analysis and FMOLS methods, oil prices negatively affected the current balance and there is a long-term relationship among the variables. In the light of the findings, regarding the effects of crude oil prices on the sub-components of the current account balance, as policy makers implement economic policies on a sectoral basis; While it can contribute the accelerate adaptation in minimizing social loss, priority should be given to sub-sectors which will support them in the event of a negative oil shock. As a result, the Spanish government should adjust its tax policies on different petroleum products for sub-components of different sub-sectors to encourage the production of these sectors.

Keywords

Oil Prices, Exchange Rates, Current Account Balance, Spain.

Seçilmiş Makroekonomik Göstergelerin Cari Denge Üzerindeki Etkisi: İspanya için Ampirik Bir Araştırma

Abstract

Bu araştırma İspanya için 1980 – 2022 yılları arasında petrol fiyatları ve kur oranlarının cari denge üzerine etkisini ve aralarındaki uzun vadeli ilişkiyi ele almıştır. Çalışmada, Johansen, Engle-Granger, Phillips-Ouliaris eş-bütünleşme testleri, etki tepki, varyans ayrıştırması analizleri ve FMOLS yöntemi kullanılmış, hem petrol fiyatları cari dengeyi olumsuz olarak etkilemiş hem de aralarında uzun vadeli ilişki tespit edilmiştir. Bulgular ışığında ham petrol fiyatlarının cari işlemler dengesinin alt bileşenleri üzerindeki etkilerine ilişkin, politika yapıcıların ekonomi politikalarını sektörler bazında hayata geçirmeleriyle birlikte; sosyal kaybın en aza indirilmesinde uyumun hızlandırılmasına yardımcı olabileceği gibi, olumsuz bir petrol şokunda onları destekleyecek alt sektörlere öncelik verilmelidir. Sonuç olarak, İspanya hükümeti, farklı alt sektörlerin alt bileşenleri için farklı petrol ürünlerine dair uygulamış oldukları vergi politikalarını, bu sektörlerin üretimini teşvik edecek şekilde ayarlamalıdır.

Keywords

Petrol Fiyatları, Kur Oranları, Cari Denge, İspanya.

References

• Agmon, T., & Laffer, A. B. (1978). Trade, payments and adjustment: The case of the oil price rise. Kyklos, 31(1), 68-85.
• Anwar, C., Suhendra, I., Ginanjar, R. A., Oktari, S., & Desmawan, D. (2023). Exchange Rate and Current Account Balance: Evidence from ASEAN-5 Countries. In Proceedings of the International Conference on Sustainability in Technological, Environmental, Law, Management, Social and Economic Matters, ICOSTELM 2022, 4-5 November 2022, Bandar Lampung, Indonesia.
• Arslan, F., & Meçik, O. (2023). Krizler çağında OECD ülkelerinde tasarruf, doğrudan yabancı sermaye yatırımları ve ekonomik büyüme: 2000-2020 dönemi. Anadolu Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 24(1), 91-115.
• Baumeister, C., & Peersman, G. (2013). Time-varying effects of oil supply shocks on the US economy. American Economic Journal: Macroeconomics, 5(4), 1-28.
• Bernanke, B. (2005). The Global Saving Glut and the US Current Account Deficit. Sandrige Lecture, Virginia Association of Economics. (No. 77). Board of Governors of the Federal Reserve System (US).
• Bruno, M., & Sachs, J. (1982). Input price shocks and the slowdown in economic growth: the case of UK manufacturing. The Review of Economic Studies, 49(5), 679-705.
• Chang, L., Mohsin, M., Gao, Z., & Taghizadeh-Hesary, F. (2023). Asymmetric impact of oil price on current account balance: Evidence from oil importing countries. Energy Economics, 123, 106749.
• Chuku, C. A., Akpan, U. F., Sam, N. R., & Effiong, E. L. (2011). Oil price shocks and the dynamics of current account balances in Nigeria. OPEC Energy Review, 35(2), 119-139.
• Das, D. K. (2016). Determinants of current account imbalance in the global economy: a dynamic panel analysis. Journal of Economic Structures, 5, 1-24.
• Dünya Bankası (2023a). Official Exchange Rate (LCU per US$, period average) “https://data.worldbank.org/indicator/PA.NUS.FCRF” 15.07.2023 tarihinde Woldbank resmi sitesi veri tabanından alınmıştır.
• Dünya Bankası (2023b). Current Account Balance (BoP, current US$). “https://data.worldbank.org/indicator/BN.CAB.XOKA.CD” 20.07.2023 tarihinde Worldbank resmi sitesi veri tabanından alınmıştır.
• Gavin, M. (1990). Structural adjustment to a terms of trade disturbance: the role of relative prices. Journal of International Economics, 28(3-4), 217-243.
• Gervais, O., Schembri, L., & Suchanek, L. (2016). Current account dynamics, real exchange rate adjustment, and the exchange rate regime in emerging-market economies. Journal of Development Economics, 119, 86-99.
• Gnimassoun, B. (2015). The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries. Journal of International Money and Finance, 53, 36-74.
• Gnimassoun, B., & Coulibaly, I. (2014). Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?. Economic Modelling, 40, 208-226.
• Gnimassoun, B., Joëts, M., & Razafindrabe, T. (2017). On the link between current account and oil price fluctuations in diversified economies: The case of Canada. International Economics, 152, 63-78.
• Gruber, J. W., & Kamin, S. B. (2007). Explaining the global pattern of current account imbalances. Journal of International Money and Finance, 26(4), 500-522.
• Hamilton, J. D. (2005). Oil and the Macroeconomy. The New Palgrave Dictionary of Economics. 2nd edition. London: Macmillan.
• Kabaklarlı, E., & Gür, M. (2011). Türkiye’de genç işsizlik sorunu ve ekonomik belirleyicilerinin uzun dönem eş-bütünleşme analizi. Youth Unemployment Problem in Turkey and Analysis of Economic Determinants with Co-entegration Model, 1-16.
• Kaminsky, G. L., & Reinhart, C. M. (1999). The twin crises: the causes of banking and balance-of-payments problems. American Economic Review, 89(3), 473-500.
• Kara, E. (2023). An Empirical Investigation on Current Account Balance, Inflation, and Real Exchange Rate. Fiscaoeconomia, 7(3), 2232-2347.
• Kilian, L., & Zhou, X. (2020). Does drawing down the US Strategic Petroleum Reserve help stabilize oil prices?. Journal of Applied Econometrics, 35(6), 673-691.
• Le, T. H., & Chang, Y. (2013). Oil price shocks and trade imbalances. Energy Economics, 36, 78-96.
• Martin, F. E. (2016). Exchange rate regimes and current account adjustment: An empirical investigation. Journal of International Money and Finance, 65, 69-93.
• Morsy, H. (2012). Current account determinants for oil-exporting countries. Emerging Markets Finance and Trade, 48(3), 122-133.
• Ng, S., & Perron, P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica, 69(6), 1519-1554.
• OECD (2023). Crude Oil Import Prices. “https://data.world/oecd/crude-oil-import-prices” 15.07.2023 tarihinde OECD resmi sitesi veri tabanından alınmıştır.
• Omoregie, O. K., & Ikpesu, F. (2019). Effect Of Oil Price, And Exchange Rate On Current Account Balance In Nigeria. The Journal of Developing Areas, 53(4), 85-100.
• Özlale, Ü., & Pekkurnaz, D. (2010). Oil prices and current account: A structural analysis for the Turkish economy. Energy Policy, 38(8), 4489-4496.
• Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
• Rafiq, S., Sgro, P., & Apergis, N. (2016). Asymmetric oil shocks and external balances of major oil exporting and importing countries. Energy Economics, 56, 42-50.
• Su, M., Zhang, M., Chen, B., Hao, Y., Zhang, Y., & Liu, G. (2017). Assessment and regulation of urban crude oil supply security: A network perspective. Journal of Cleaner Production, 165, 93-102.
• Turan, T., Karakas, M., & Ozer, H. A. (2020). How do oil price changes affect the current account balance? Evidence from co-integration and causality tests. Ekonomicky Casopis, 68(1), 55-68.
• Vieira, F. V., & MacDonald, R. (2020). The role of exchange rate for current account: A panel data analysis. EconomiA, 21(1), 57-72.
• Yang, J., & Zhou, Y. (2020). Return and volatility transmission between China's and international crude oil futures markets: A first look. Journal of Futures Markets, 40(6), 860-884.
• Yorgancılar, F. N., & Soydal, H. (2016). Analysis of exchange market pressure ındex with the selected data: case of Turkey. Sosyal Bilimler Dergisi (The Journal of Social Sciences), 3(6), 409-438.
• Yu, L., Wang, S., & Lai, K. K. (2008). Forecasting crude oil price with an EMD-based neural network ensemble learning paradigm. Energy Economics, 30(5), 2623-2635.
• Zaouali, S. (2007). Impact of higher oil prices on the Chinese economy. OPEC Review, 31(3), 191-214.
• Zhou, D. (2018). The population age structure, the real effective exchange rate and the current account balance—empirical analysis based on the data of Chinese Provincial Panel. American Journal of Industrial and Business Management, 8(1), 69-82.