Determinants of Current Account Balance in Former Soviet Countries and Diff erences Caused by Oil Wealth

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The purpose of this paper is to investigate the basic determinants of current account balance of former Soviet Union member countries in the years of 1995 to 2010. Empirical analysis base on panel data fi xed eff ect models that established for ten former union member countries and diff erent subgroups in terms of oil and natural gas wealth. The observed fi ndings for all country groups suggest that investment increase, fi nancial development and increase of young age dependency ratio deteriorate current account balance. Conclusions show that current account balance has inertia and high sustainability in non oil reach countries. However, in countries rich in oil and naturalgas, there is not such relation refl ecting high volatility of energy prices. In oil rich countries, changes in terms of trade and natural resource revenues are the most important determinants of current account variations. In addition, the twin defi cits hypothesis is supported for non oil rich countries. Moreover, estimation results not support cyclical properties and development stages hypothesis of current account balance in countries included in this study.

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Current account balance determinants , former Soviet Union countries , oil wealth , fixed eff ect model.

Ege Academic Review (EAR)

365

Ege Academic Review (EAR)