Current account modelling - long-term trends and cyclical factors

This article focuses on current account dynamics in selected Central European countries. We document that the current account is influenced both by long-term trends linked with the convergence process and by cyclical factors of the external environment. On this basis, we argue that both these factors - long-term and cyclical - should be taken into account in current account modelling, and we introduce an empirical model that can incorporate them consistently. We demonstrate this model on the example of the Czech Republic.