Culture and current account balances

Abstract

This article contributes to the literature of current account balances by introducing cultural variables that until now have been omitted. The World Values Survey indicates that the Roman Catholics do not consider thrift as important as others. We propose that Catholic countries tend to run current account deficits. This result remains robust even if we control for close to all of the determinants that have been included in previous studies. We find evidence that the inclination of Catholic countries to have high levels of uncertainty avoidance goes to a great length in explaining the result.

Keywords:

• current account
• culture
• religion

JEL Classification:

• F21
• F41
• Z1

Acknowledgements

This article has benefited from the insightful comments by Nidhaleddine Ben Cheikh, Charles M. North, Manuel Bagues, Krista Riukula, Jukka Pirttilä, Juha Junttila, and the other participants of the 18th Annual International Conference on Macroeconomic Analysis and International Finance, the thirteenth ASREC Annual Conference at Chapman University, the Finnish Doctoral Programme in Economics Macroeconomics Workshop II/2013 and the 7th Allecon Seminar at Tampere. This study is part of the work of the JSBE Research Group on International Macro and Finance (JyIMaF).

Notes

¹ Notice that there are plenty of small religious denominations that are found in only one or a few countries. In such cases, it is trivial to find statistically significant results for religious denominations.

² Notice that the number of observations decreases, when uncertainty avoidance index is included.

Additional information

Funding

Mika Nieminen is thankful for financial support provided by the Yrjö Jahnsson Foundation [grant number 6294], Björn Savén Finnish American Scholarship and OP-Pohjola Group Research Foundation. Kari Heimonen is thankful for financial support provided by the Academy of Finland (Project No. 269339) and the Yrjö Jahnsson Foundation [grant number 6513].