The Budget Balance and Current Account Balance Relationship in Central and Eastern European Economies: An Econometric Investigation

The aim of this study is to examine the relationship between the budget and the current account balance for Central and Eastern European countries emprically by means of the Zivot-Andrews (1992) unit root test, Pesaran et al. (2001) bounds testing procedure and Toda and Yamamato (1995) causality analysis. The findings of this study are; i) the evidence of the bilateral causality is found for Bulgaria, ii) a causal relationship from current account balance to the budget balance exists for Latvia, iii) the causality runs from the budget balance to the current account balance in Croatia, Hungary, Lithuania and Slovenia, iv) no causal relationship is found for the other sample countries.