TY  - JOUR
AU  - Roubini,Nouriel
AU  - Wachtel,Paul
TI  - Current Account Sustainability in Transition Economies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6468
PY  - 1998
Y2  - March 1998
UR  - http://www.nber.org/papers/w6468
L1  - http://www.nber.org/papers/w6468.pdf
N1  - Author contact info:
Nouriel Roubini
Department of Economics, KMC 7-83
Stern School of Business, New York University
44 West 4th Street
New York, NY  10012
Tel: 212/998-0886
Fax: 212/995-4218
E-Mail: nroubini@stern.nyu.edu

Paul Wachtel
Stern School of Business
New York University
44 West 4th Street (769)
New York, NY 10012
Tel: 212-998-4030
E-Mail: pwachtel@stern.nyu.edu
AB  - This paper presents an analysis of the sustainability of current account deficits in transition economies in Central and Eastern Europe.  These countries have experienced large current account imbalances in the transition to a market economy.  We consider a wide range of macroeconomic factors that may indicate whether such imbalances are sustainable.  We find that capital inflows and the choice of regimes of fixed exchange rates have led to a real exchange rate appreciation in many countries; this in turn has led to a significant loss of competitiveness and a worsening of the current account.  In several countries there are a number of other indicators that point to a fragility of the external balance: weak banking and financial systems, large fiscal imbalances, low foreign reserves, increasing foreign debt and foreign debt-burden ratios.  However, short-term portfolio investments (so-called  hot money' inflows) are still relatively small in the transition economies examined, thus limiting the possibility of sudden speculative capital outflows.
ER  -