Abstract
This study aims to find out the role of macroeconomic stability in current account balances. The analysis is completed for the period between 1980 and 2016 for 97 countries. The macroeconomic stability is represented by an index created with the countries’ inflation rate (CPI), growth rate, unemployment rate, and fiscal balance data. It is found that macroeconomic stability is one of the important determinants of current account balances like institutional quality and financial development. It has negative and statistically significant relationships with current account balances for four different country groups: developing countries, all countries except industrial, all countries except industrial and African countries, and all countries. Results show that macroeconomic stability is a crucial determinant for developing countries rather than high-income countries.
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