## 2015estimates — Introduction and EBA Spring 2015 Overview

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### Overview and scope
- The tables contain estimates from the EBA analysis of current accounts and real exchange rates implemented in Spring 2015.
- The estimates were used, together with other information and country desk judgment, as input to the 2015 External Sector Report.
- The EBA analysis covers 2014 outcomes for current accounts and 2014 year average real effective exchange rates (REERs).
- The external sustainability (ES) analysis refers to projections of 2020 current accounts.
- All analyses draw on data available to IMF staff as of Spring 2015; WEO database data are as of June 2, 2015.
- Country coverage: 25 countries that are part of both the External Sector Report and the EBA analysis; summary results also include a Euro area aggregate (GDP-weighted average of the estimates for the 11 largest Euro area economies).
- Organization: four sections corresponding to distinct methodologies; new in 2015 is the “Level” REER analysis (the former EBA REER analysis is now “Index” REER).

*Source: EBA analysis implemented in Spring 2015 (2015estimates - Introduction).*

### Section I — Current Account Regression-based Analysis (2014 outcomes)

### Methodology and decomposition
- Observed 2014 current account balances (CA, percent of GDP) decomposed into:
  - Cyclical component = estimated contributions of output cycle and commodity ToT cycle.
  - Cyclically-adjusted component, decomposed into:
    - Cyclically-adjusted “norm” level (regression at observed fundamentals and desirable P* policy settings).
    - Contribution from identified policy gaps (sum of five policy-gap types).
    - Unexplained regression residual.
  - Total CA Gap = contribution of identified policy gaps + unexplained residual.
- Multilateral consistency adjustments:
  - Cross-country sum of CA norm levels (in US$) matched to sum of actual 2014 CA levels of all 49 EBA countries.
  - Cross-country sums of gap columns and cyclical contributions set to zero via small uniform adjustments.
- Policy-gap contributions computed from domestic gaps (P-P*) and world gaps (P_wo − P*_wo), net positions [(P-P_wo) − (P*-P*_wo)], multiplied by regression coefficients; world averages are GDP-weighted.
- Cyclical component split into:
  - Contribution due to difference between domestic and world output gap.
  - Contribution due to commodity ToT gap (cyclical) interacting with trade openness.

### Selected country-level decomposition outcomes (percent of GDP)
- Australia:
  - Actual 2014 CA: -2.8%
  - Cyclical contributions (incl. ToT): 0.3%
  - Cyclically Adjusted 2014 CA: -3.0%
  - Cyclically Adjusted CA Norm: -1.2%
  - Contribution of Identified Policy Gaps: -0.6%
  - Unexplained Residual: -1.2%
  - Total Gap, including Residual: -1.8%
- China:
  - Actual 2014 CA: 2.1%
  - Cyclical contributions (incl. ToT): -0.4%
  - Cyclically Adjusted 2014 CA: 2.5%
  - Cyclically Adjusted CA Norm: 0.0%
  - Contribution of Identified Policy Gaps: 1.8%
  - Unexplained Residual: 0.7%
  - Total Gap, including Residual: 2.5%
- Germany:
  - Actual 2014 CA: 7.6%
  - Cyclical contributions (incl. ToT): -0.5%
  - Cyclically Adjusted 2014 CA: 8.1%
  - Cyclically Adjusted CA Norm: 3.9%
  - Contribution of Identified Policy Gaps: 1.3%
  - Unexplained Residual: 2.9%
  - Total Gap, including Residual: 4.2%
- India:
  - Actual 2014 CA: -1.4%
  - Cyclical contributions (incl. ToT): -0.6%
  - Cyclically Adjusted 2014 CA: -0.8%
  - Cyclically Adjusted CA Norm: -4.2%
  - Contribution of Identified Policy Gaps: 0.8%
  - Unexplained Residual: 2.5%
  - Total Gap, including Residual: 3.3%
- Japan:
  - Actual 2014 CA: 0.5%
  - Cyclical contributions (incl. ToT): -0.1%
  - Cyclically Adjusted 2014 CA: 0.6%
  - Cyclically Adjusted CA Norm: 3.1%
  - Contribution of Identified Policy Gaps: -2.8%
  - Unexplained Residual: 0.3%
  - Total Gap, including Residual: -2.5%
- United States:
  - Actual 2014 CA: -2.4%
  - Cyclical contributions (incl. ToT): 0.2%
  - Cyclically Adjusted 2014 CA: -2.5%
  - Cyclically Adjusted CA Norm: -1.3%
  - Contribution of Identified Policy Gaps: -0.6%
  - Unexplained Residual: -0.6%
  - Total Gap, including Residual: -1.2%
- Euro Area (aggregate, 11 largest economies):
  - Actual 2014 CA: 2.3%
  - Cyclical contributions (incl. ToT): 0.4%
  - Cyclically Adjusted 2014 CA: 1.9%
  - Cyclically Adjusted CA Norm: 2.1%
  - Contribution of Identified Policy Gaps: 0.1%
  - Unexplained Residual: -0.2%
  - Total Gap, including Residual: -0.2%

### Aggregate policy-gap contributions by type (selected totals, percent of GDP)
- Total contribution of identified policy gaps (All (sum) column, includes multilateral adjustments):
  - Australia: -0.6%
  - Belgium: -0.8%
  - Brazil: 0.1%
  - Canada: 0.5%
  - China: 1.8%
  - France: -0.6%
  - Germany: 1.3%
  - India: 0.8%
  - Indonesia: 0.8%
  - Italy: 0.4%
  - Japan: -2.8%
  - Korea: 0.9%
  - Malaysia: 0.0%
  - Mexico: 0.6%
  - Netherlands: -0.2%
  - Poland: -0.4%
  - Russia: 0.6%
  - South Africa: 0.2%
  - Spain: -1.7%
  - Sweden: -0.5%
  - Switzerland: 0.6%
  - Thailand: 0.9%
  - Turkey: 0.8%
  - United Kingdom: -1.7%
  - United States: -0.6%
  - Euro Area (agg): 0.1%

### Key parameter values and regression highlights (CA regression, 1986–2013 sample)
- Selected regression coefficients (robust p-values shown):
  - L. NFA/Y: 0.015** (0.016)
  - Financial Center Dummy: 0.027*** (0.000)
  - GDP growth, forecast in 5 years: -0.425*** (0.000)
  - L.Public Health Spending/GDP: -0.503*** (0.000)
  - Cyclically adjusted Fiscal Balance, instrumented: 0.470*** (0.000)
  - (∆Reserves)/GDP * K controls, instrumented: 0.449** (0.024)
  - Demeaned Private Credit/GDP: -0.021*** (0.005)
  - Output Gap: -0.385*** (0.000)
  - Commodity ToT gap * Trade Openness: 0.197*** (0.000)
  - Observations: 1,197; Number of countries: 49; Root MSE: 0.032.
- Fiscal Balance beta used in decomposition: 0.47.
- Public Health Expenditure beta used in decomposition: -0.50 (lagged).
- Change in Reserves/GDP beta used in decomposition: 0.45 (instrumented).
- Cyclical coefficients: Relative output gap coefficient -0.3846; Commodity ToT gap * Trade Openness coefficient 0.1975.

*Source: 2015 EBA regression-based analysis of 2014 current accounts (EBA — Spring 2015 data and methodology).*

### Section II — REER Regression-based Analysis (Index REER, 2014 year average)

### Overview and model fit
- Analysis: EBA’s 2015 analysis of 2014 year average Index REER values using data available as of Spring 2015; estimation sample extended through 2013.
- Total REER Gap = contributions of policy gaps + regression residual; multilateral consistency adjusted by weighted average of 2014 regression residuals (subtracting -1.8%).
- Model statistics:
  - Observations: 882
  - R-squared: 0.61
  - RMSE: 0.08271

### Selected main regression coefficients (Index REER; robust p-values in parentheses)
- Change in reserves to GDP * cap controls: -1.73*** (0.00)
- Lag of health expenditure to GDP: 1.23 (0.11)
- Real interest rate differential * K openness: 0.66*** (0.00)
- Private credit/GDP: 0.13*** (0.00)
- Lag of Demeaned GDPpw/Top3GDPpw (PPP): 0.70*** (0.00)
- Lag of Demeaned GDPpw/Top3GDPpw * capital openness: -0.49*** (0.00)
- Lag of VIX * capital account openness: -0.26*** (0.00)
- Lag of VIX * capital account openness * share of own currency in global reserve: 0.84** (0.02)
- Share of country's currency held as FX reserve: 0.04 (0.54)
- Lagged financial home bias: 0.37*** (0.00)
- Expected GDP growth (5 years out): 1.86*** (0.00)
- Share of administered prices: -2.12*** (0.00)
- Constant: 4.33*** (0.00)

### Total Index REER Gaps — selected country totals (Total = A + B, percent deviation from 2014 avg. REER)
- Australia: 10.8%
- Belgium: 7.1%
- Brazil: -3.1%
- Canada: -0.5%
- China: -6.5%
- France: -1.1%
- Germany: 7.3%
- India: 1.3%
- Indonesia: -9.8%
- Italy: 2.9%
- Japan: -26.3%
- Korea: 0.1%
- Malaysia: -21.2%
- Mexico: -10.3%
- Netherlands: -1.4%
- Poland: -2.4%
- Russia: -12.6%
- South Africa: -22.8%
- Spain: 13.3%
- Sweden: -10.3%
- Switzerland: 11.3%
- Thailand: -2.2%
- Turkey: 6.4%
- United Kingdom: 5.6%
- United States: 2.3%
- Euro Area: 4.6%

### Net contributions: policy gaps versus residuals (selected examples, percent dev. from 2014 avg. REER)
- Australia: Total policy contributions sum -1.3%; Residual -1.0%.
- Brazil: Total -3.6%; Residual -3.4%.
- China: Total -7.5%; Residual -7.3%.
- India: Total -11.2%; Residual -10.9%.
- Japan: Total -1.1%; Residual -1.0%.
- Mexico: Total -5.0%; Residual -4.4%.
- Spain: Total 4.5%; Residual 5.1%.
- Switzerland: Total 2.3%; Residual 3.0%.
- United States: Total 1.0%; Residual 0.8%.

### Breakdown by policy type (high-level Index REER findings)
- Public Expenditure on Health / GDP:
  - Coefficient: 1.23.
  - Examples: China contribution -6.8% (Total), domestic -6.0%; India contribution -8.7% (Total), domestic -8.0%; United States contribution 0.0% (Total), domestic 0.0%.
  - Countries with large benchmark health shares: Switzerland 63.1%; United States 56.5%.
- Capital Controls / Capital Account Openness (P = Change in reserves to GDP * Capital Controls):
  - Coefficient in component table: -1.73.
  - Examples of overall contributions: Malaysia 5.4%; Brazil -1.8%; China -2.3%.
  - Benchmark capital controls shares: Brazil 25.0%; China 50.0%; India 50.0%; Indonesia 37.5%.
- Change in FX Reserves / GDP:
  - Coefficient: -1.73*** (for Change in reserves to GDP * cap controls in Index REER table).
  - Examples of overall contributions: China 2.9%; Spain 2.8%; Netherlands -2.2%.
- Private Credit / GDP:
  - Coefficient: 0.13***.
  - Examples: Switzerland 1.6%; Belgium 0.8%; Japan -1.0%; Russia -1.5%.
- Real Short Term Interest Rates (interacted with capital openness): coefficient 0.66***; accounts for QE effects in Japan, U.S., U.K.

*International Monetary Fund — EBA Analysis of 2014 Index Real Effective Exchange Rates (2015 estimates, Section II).*

### Section III — REER Regression-based Analysis (Level REER, 2014 year average)

### Purpose and multilateral adjustment
- Dependent variable: level measure of a country’s real exchange rate (captures cross-country price level differences).
- Independent variables similar to Index REER analysis; two regression specifications differ.
- Multilateral consistency adjustment: adjusted by weighted average of 2014 regression residuals (subtracting -8%).

### Key regression coefficients and model statistics (Level REER)
- Change in reserves to GDP * cap controls: -2.16* (0.08)
- Lag of health expenditure to GDP: 1.79** (0.04)
- Private credit/GDP: 0.12*** (0.01)
- Lag Demeaned PPPGDP/Top3(PPP): 0.16*** (0.00)
- Lag of VIX * capital account openness: -0.33** (0.02)
- Share of country's currency held as FX reserve: -0.33*** (0.00)
- Lag of Trade Openness: -0.31*** (0.00)
- Expected GDP growth (5 years out): 1.83** (0.05)
- Population Growth (rel to TRD PRT): 5.59** (0.02)
- Aging Speed: 0.68*** (0.01)
- Dependency Ratio: 0.89*** (0.00)
- ICRG political risk variable: 0.44*** (0.00)
- NFA/GDP: 0.11*** (0.00)
- VAT Revenue, % of GDP: 1.21** (0.03)
- Log Commodity ToT (levels): 0.06*** (0.00)
- Real interest rate differential * K openness: 0.94** (0.02)
- Constant: 0.19*** (0.00)
- Observations: 838; R-squared: 0.91; RMSE: 0.1409; Number of Countries: 39.

### Selected country-level Level REER results (Total REER Gap (C = A+B) and Net Policy-Gap Contributions)
- Australia:
  - Sum (A): 18.4%
  - Total REER Gap: -1.8%
  - Net component contributions: Health Exp. -1.8%; Capital Control -1.3%; Reserves 0.0%; Private Credit 0.1%; Real Interest Rate -0.5%; Residual 20.1%.
- China:
  - Sum (A): 6.8%
  - Total REER Gap: -3.5%
  - Net component contributions: Health Exp. -3.5%; Capital Control -3.2%; Reserves -0.9%; Private Credit -1.3%; Real Interest Rate 2.6%; Residual 10.3%.
- Germany:
  - Sum (A): -15.9%
  - Total REER Gap: 0.7%
  - Net contributions: Health Exp. 0.7%; Capital Control -0.1%; Reserves 0.0%; Private Credit 0.1%; Real Interest Rate -0.4%; Residual -16.6%.
- India:
  - Sum (A): 4.8%
  - Total REER Gap: -4.3%
  - Net contributions: Health Exp. -4.3%; Capital Control 0.5%; Reserves -0.9%; Private Credit -1.9%; Real Interest Rate 0.0%; Residual 9.1%.
- Japan:
  - Sum (A): -21.0%
  - Total REER Gap: -1.2%
  - Net contributions: Health Exp. -1.2%; Capital Control 0.9%; Reserves 0.0%; Private Credit 0.2%; Real Interest Rate -0.8%; Residual -19.8%.
- United States:
  - Sum (A): 8.2%
  - Total REER Gap: 1.5%
  - Net contributions: Health Exp. 1.5%; Capital Control 1.4%; Reserves 0.0%; Private Credit 0.2%; Real Interest Rate -0.1%; Residual 6.8%.
- Euro Area aggregate:
  - Sum (A): -0.3%
  - Total REER Gap: 0.9%
  - Net contributions: Health Exp. 0.9%; Capital Control 0.5%; Reserves 0.0%; Private Credit 0.1%; Real Interest Rate -0.2%; Residual -1.3%.

### Component-specific level-REER notes
- Public Expenditure on Health / GDP: coefficient 1.79 (lagged fitted) used to compute contributions; many countries show negative policy-gap contributions from public health spending in level REER tables.
- Capital Controls (with VIX interaction) and ∆Reserves: P defined as Change in reserves to GDP * Capital Controls; coefficient for this interaction reported as -2.16*.
- Private Credit / GDP: coefficient 0.12***; country contributions vary (e.g., Switzerland 2.2%, Netherlands -2.4%, India -2.0%).
- Real Short Term Interest Rates: coefficient 0.94** (differential demeaned interacted with capital openness) and used to capture QE effects for Japan, U.S., and U.K.

*Source: EBA Analysis of the 2014 Level of the REER (2015 estimates, Section III).*

### Section IV — External Sustainability (ES) Analysis (CGER methodology)

### Purpose and method
- ES approach calculates the CA/GDP adjustment consistent with stabilizing NFA/GDP at a benchmark level (typically the recent 2013 actual NFA/GDP, except where modified for select economies).
- Method steps:
  1. Calculate CA/GDP that would stabilize NFA/GDP at the benchmark level.
  2. Compare WEO-projected (2019) CA/GDP (real exchange rates constant at early 2015 levels, current policies effective 2015–2020, output gaps closed) with the NFA-stabilizing CA/GDP.
- The reported CA gap = adjusted CA projected for 2020 minus CA that would stabilize NFA/GDP at the benchmark level.
- ES gaps focus on sustainability and are not directly comparable to CA or REER regression-based gaps.
- Projections based on WEO database as of June 2, 2015; CA includes capital account in addition to current account.

### Selected ES results — 2013 NFA/GDP benchmark, adjusted CA projections, and CA/GDP gaps (D) - (E)
- Australia:
  - 2013 NFA/GDP: -54.1%
  - Benchmark: -54.1%
  - Unadjusted medium-term CA/GDP: -3.3%
  - Adjusted medium-term CA/GDP: -3.1%
  - CA/GDP stabilizing NFA at Benchmark: -2.6%
  - CA/GDP Gap: -0.6%
- Belgium:
  - 2013 NFA/GDP: 39.7%
  - Benchmark: 39.7%
  - Unadjusted medium-term CA/GDP: 2.2%
  - Adjusted medium-term CA/GDP: -0.9%
  - CA/GDP stabilizing NFA at Benchmark: 0.4%
  - CA/GDP Gap: -1.3%
- Brazil:
  - 2013 NFA/GDP: -34.1%
  - Benchmark: -34.1%
  - Unadjusted medium-term CA/GDP: -3.2%
  - Adjusted medium-term CA/GDP: -5.1%
  - CA/GDP stabilizing NFA at Benchmark: -1.2%
  - CA/GDP Gap: -4.0%
- Canada:
  - 2013 NFA/GDP: 1.2%
  - Benchmark: 1.2%
  - Unadjusted medium-term CA/GDP: -2.1%
  - Adjusted medium-term CA/GDP: -2.1%
  - CA/GDP stabilizing NFA at Benchmark: -0.6%
  - CA/GDP Gap: -1.5%
- China:
  - 2013 NFA/GDP: 17.6%
  - Benchmark: 17.6%
  - Unadjusted medium-term CA/GDP: 3.1%
  - Adjusted medium-term CA/GDP: 3.2%
  - CA/GDP stabilizing NFA at Benchmark: 0.3%
  - CA/GDP Gap: 2.9%
- Euro Area:
  - 2013 NFA/GDP: -15.1%
  - Benchmark: -6.9%
  - Unadjusted medium-term CA/GDP: 2.6%
  - Adjusted medium-term CA/GDP: 3.1%
  - CA/GDP stabilizing NFA at Benchmark: 0.6%
  - CA/GDP Gap: 2.6%
- India:
  - 2013 NFA/GDP: -27.1%
  - Benchmark: -27.1%
  - Unadjusted medium-term CA/GDP: -2.2%
  - Adjusted medium-term CA/GDP: -2.2%
  - CA/GDP stabilizing NFA at Benchmark: -2.1%
  - CA/GDP Gap: -0.1%
- Japan:
  - 2013 NFA/GDP: 67.0%
  - Benchmark: 67.0%
  - Unadjusted medium-term CA/GDP: 2.2%
  - Adjusted medium-term CA/GDP: 2.2%
  - CA/GDP stabilizing NFA at Benchmark: 2.1%
  - CA/GDP Gap: 0.1%
- Netherlands:
  - 2013 NFA/GDP: 39.9%
  - Benchmark: 39.9%
  - Unadjusted medium-term CA/GDP: 9.5%
  - Adjusted medium-term CA/GDP: 6.2%
  - CA/GDP stabilizing NFA at Benchmark: 0.7%
  - CA/GDP Gap: 5.5%
- Poland:
  - 2013 NFA/GDP: -68.9%
  - Benchmark: -68.9%
  - Unadjusted medium-term CA/GDP: -1.8%
  - Adjusted medium-term CA/GDP: -1.6%
  - CA/GDP stabilizing NFA at Benchmark: -3.8%
  - CA/GDP Gap: 2.2%
- Russia:
  - 2013 NFA/GDP: 4.6%
  - Benchmark: 4.6%
  - Unadjusted medium-term CA/GDP: 4.8%
  - Adjusted medium-term CA/GDP: 4.9%
  - CA/GDP stabilizing NFA at Benchmark: 2.8%
  - CA/GDP Gap: 2.0%
- Spain:
  - 2013 NFA/GDP: -96.8%
  - Benchmark: -48.4%
  - Unadjusted medium-term CA/GDP: 1.3%
  - Adjusted medium-term CA/GDP: 0.1%
  - CA/GDP stabilizing NFA at Benchmark: 0.4%
  - CA/GDP Gap: -0.3%
- Sweden:
  - 2013 NFA/GDP: -6.2%
  - Benchmark: 24.0%
  - Unadjusted medium-term CA/GDP: 5.7%
  - Adjusted medium-term CA/GDP: 5.6%
  - CA/GDP stabilizing NFA at Benchmark: 1.2%
  - CA/GDP Gap: 4.4%
- Switzerland:
  - 2013 NFA/GDP: 131.7%
  - Benchmark: 131.7%
  - Unadjusted medium-term CA/GDP: 5.3%
  - Adjusted medium-term CA/GDP: 5.5%
  - CA/GDP stabilizing NFA at Benchmark: 7.5%
  - CA/GDP Gap: -2.0%
- Thailand:
  - 2013 NFA/GDP: -20.4%
  - Benchmark: -20.4%
  - Unadjusted medium-term CA/GDP: 0.9%
  - Adjusted medium-term CA/GDP: 1.0%
  - CA/GDP stabilizing NFA at Benchmark: -0.6%
  - CA/GDP Gap: 1.6%
- Turkey:
  - 2013 NFA/GDP: -55.7%
  - Benchmark: -55.7%
  - Unadjusted medium-term CA/GDP: -5.1%
  - Adjusted medium-term CA/GDP: -5.0%
  - CA/GDP stabilizing NFA at Benchmark: -2.9%
  - CA/GDP Gap: -2.0%
- United Kingdom:
  - 2013 NFA/GDP: -2.7%
  - Benchmark: -2.7%
  - Unadjusted medium-term CA/GDP: -3.4%
  - Adjusted medium-term CA/GDP: -3.3%
  - CA/GDP stabilizing NFA at Benchmark: 0.0%
  - CA/GDP Gap: -3.2%
- United States:
  - 2013 NFA/GDP: -34.0%
  - Benchmark: -34.0%
  - Unadjusted medium-term CA/GDP: -2.6%
  - Adjusted medium-term CA/GDP: -2.6%
  - CA/GDP stabilizing NFA at Benchmark: -1.5%
  - CA/GDP Gap: -1.2%

*EBA Analysis of the 2014 Level of the REER; External Sustainability Approach results based on CGER "ES" methodology and WEO database as of June 2nd 2015.*

### Introduction

### 2015estimates - Introduction

### Overview
- The tables contain estimates from the EBA analysis of current accounts and real exchange rates implemented in Spring 2015.
- The estimates were used as an input, together with other information and country desk judgment, to the 2015 External Sector Report.
- The EBA analysis covers 2014 outcomes for current accounts and 2014 year average real effective exchange rates (REERs).
- The external sustainability (ES) analysis refers to projections of 2020 current accounts.
- All analyses draw on data available to IMF staff as of Spring 2015.
- The data drawn from the World Economic Outlook (WEO) database are as of June 2, 2015.

### Country coverage and aggregates
- Tables refer to the 25 countries that are part of both the External Sector Report and the EBA analysis.
- Summary results also include a Euro area aggregate, constructed as the GDP-weighted average of the estimates for the 11 largest Euro area economies.

### Organization of the analyses
- Information is organized in four sections, corresponding to distinct methodologies, with brief explanatory remarks in each.
- New to this year’s EBA toolkit is the “Level” REER analysis.
  - Key difference between the “Level” and “Index” REER models: the dependent variable is measured using the level of prices in the “Level” model, and an index (set to the same value for all countries in an arbitrary year) in the “Index” model.
  - With the introduction of the Level REER, the former EBA REER analysis is now referred to as the “Index REER”.

### Sections
- Section I: Regression-based analysis of 2014 current accounts
- Section II: Regression-based analysis of the 2014 Index REER
- Section III: Regression-based analysis of the 2014 Level REER
- Section IV: External sustainability analysis

### Methodology notes and sources of additional information
- Estimates are derived using a slight modification of the “2.0” of the EBA methodology, first used in the 2013 Pilot External Sector Report.
- The modification includes extending the sample used in estimation through 2013 (previously through 2010), and allowing for some nonlinearities in the impact of demographics on current accounts.
- The methodology is comprehensively described in the paper “The External Balance Assessment (EBA) Methodology”, which provides general guidance on the interpretation of results as well. See IMF Working Paper WP/13/272 (http://www.imf.org/external/pubs/ft/wp/2013/wp13272.pdf).

*Source: EBA analysis implemented in Spring 2015 (2015estimates - Introduction).*

### Section I — Current Account Regression-based Analysis

### Section I — Current Account Regression-based Analysis (2015 EBA analysis of 2014 current accounts)

### Methodology and decomposition
- The 2015 EBA analysis decomposes observed 2014 current account balances (CA, as percent of GDP) into:
  - A cyclical component (sum of estimated contributions of output cycle and commodity terms of trade (ToT) cycle).
  - A cyclically-adjusted component, further decomposed into:
    - A cyclically-adjusted “norm” level for the current account (regression evaluated at observed fundamentals and desirable P* policy settings, and zero cyclical contributions).
    - A contribution from identified policy gaps (sum of five policy-gap types).
    - An unexplained regression residual.
  - The Total CA Gap is the sum of the contribution of identified policy gaps and the unexplained residual.
- Multilateral consistency adjustments: small uniform adjustments (in terms of each country’s own GDP) were applied so that:
  - The cross-country sum of CA norm levels (measured in US$) matches the sum of actual 2014 CA levels of all 49 EBA countries.
  - The cross-country sums of the gap columns and of the cyclical contributions are zero.
- Policy-gap contributions are derived by computing domestic gaps (P-P*) and world gaps (P_wo − P*_wo), taking net positions [(P-P_wo) − (P*-P*_wo)], and multiplying by regression coefficients. World averages are GDP-weighted averages.
- The cyclical component is split into:
  - Contribution due to the difference between domestic and world output gap.
  - Contribution due to the commodity terms of trade gap (cyclical component), interacting with trade openness.

### Key country-level outcomes (selected entries from regression decomposition, all values in percent of GDP)
- Australia:
  - Actual 2014 CA: -2.8%
  - Cyclical contributions (incl. ToT): 0.3%
  - Cyclically Adjusted 2014 CA: -3.0%
  - Cyclically Adjusted CA Norm: -1.2%
  - Contribution of Identified Policy Gaps: -0.6%
  - Unexplained Residual: -1.2%
  - Total Gap, including Residual: -1.8%
- China:
  - Actual 2014 CA: 2.1%
  - Cyclical contributions (incl. ToT): -0.4%
  - Cyclically Adjusted 2014 CA: 2.5%
  - Cyclically Adjusted CA Norm: 0.0%
  - Contribution of Identified Policy Gaps: 1.8%
  - Unexplained Residual: 0.7%
  - Total Gap, including Residual: 2.5%
- Germany:
  - Actual 2014 CA: 7.6%
  - Cyclical contributions (incl. ToT): -0.5%
  - Cyclically Adjusted 2014 CA: 8.1%
  - Cyclically Adjusted CA Norm: 3.9%
  - Contribution of Identified Policy Gaps: 1.3%
  - Unexplained Residual: 2.9%
  - Total Gap, including Residual: 4.2%
- India:
  - Actual 2014 CA: -1.4%
  - Cyclical contributions (incl. ToT): -0.6%
  - Cyclically Adjusted 2014 CA: -0.8%
  - Cyclically Adjusted CA Norm: -4.2%
  - Contribution of Identified Policy Gaps: 0.8%
  - Unexplained Residual: 2.5%
  - Total Gap, including Residual: 3.3%
- Japan:
  - Actual 2014 CA: 0.5%
  - Cyclical contributions (incl. ToT): -0.1%
  - Cyclically Adjusted 2014 CA: 0.6%
  - Cyclically Adjusted CA Norm: 3.1%
  - Contribution of Identified Policy Gaps: -2.8%
  - Unexplained Residual: 0.3%
  - Total Gap, including Residual: -2.5%
- United States:
  - Actual 2014 CA: -2.4%
  - Cyclical contributions (incl. ToT): 0.2%
  - Cyclically Adjusted 2014 CA: -2.5%
  - Cyclically Adjusted CA Norm: -1.3%
  - Contribution of Identified Policy Gaps: -0.6%
  - Unexplained Residual: -0.6%
  - Total Gap, including Residual: -1.2%
- Euro Area (aggregate, 11 largest economies):
  - Actual 2014 CA: 2.3%
  - Cyclical contributions (incl. ToT): 0.4%
  - Cyclically Adjusted 2014 CA: 1.9%
  - Cyclically Adjusted CA Norm: 2.1%
  - Contribution of Identified Policy Gaps: 0.1%
  - Unexplained Residual: -0.2%
  - Total Gap, including Residual: -0.2%

### Aggregate policy-gap contributions by type (selected totals from EBA-estimated contributions table; all values in percent of GDP)
- Total contribution of identified policy gaps (All (sum) column, includes multilateral adjustments):
  - Australia: -0.6%
  - Belgium: -0.8%
  - Brazil: 0.1%
  - Canada: 0.5%
  - China: 1.8%
  - France: -0.6%
  - Germany: 1.3%
  - India: 0.8%
  - Indonesia: 0.8%
  - Italy: 0.4%
  - Japan: -2.8%
  - Korea: 0.9%
  - Malaysia: 0.0%
  - Mexico: 0.6%
  - Netherlands: -0.2%
  - Poland: -0.4%
  - Russia: 0.6%
  - South Africa: 0.2%
  - Spain: -1.7%
  - Sweden: -0.5%
  - Switzerland: 0.6%
  - Thailand: 0.9%
  - Turkey: 0.8%
  - United Kingdom: -1.7%
  - United States: -0.6%
  - Euro Area (agg): 0.1%
- Breakdowns by policy type (examples, totals include domestic subcomponents where shown):
  - Fiscal Balance (Total / dom.): e.g., Australia -1.3% (dom. -0.7% shown in fiscal detail); China 1.1% (dom. 0.7%).
  - Public Health Expenditure (Total / dom.): e.g., Netherlands -1.5% (implying large positive P and P* levels in health tables), China 0.8% (policy gap -1.6% with P=1.4%, P*=3.3%).
  - Change in Reserves (∆Reserves)/GDP (Total / dom.): e.g., Brazil 0.4% (beta 0.45, policy gap 0.9%), Malaysia -1.4% (policy gap -3.0%).
  - Private Credit/GDP (demeaned) contribution (Overall Contribution column): e.g., China -0.4%, Netherlands 0.4%, Spain -0.4%, Thailand -0.3%.
  - Capital Controls contribution (Overall Contribution column in capital controls table): examples include China 0.7%, India 0.8%, Mexico 0.3%, Netherlands 0.0%, United States 0.0%.

### Fiscal-gap and other policy-gap mechanics (selected parameters and sample values)
- Fiscal Balance:
  - Regression coefficient (beta) used: 0.47 (Cyclically adjusted Fiscal Balance, instrumented).
  - Fiscal policy gap measure relates to (P-P_wo) − (P*-P*_wo).
  - Sample country fiscal-policy inputs (P, P*, P_wo, P*_wo):
    - Australia: Contribution -0.7%; beta 0.47; Policy Gap  -1.6%; P -3.5%; P* -3.0%; P_wo 0.5%; P*_wo -3.0%; benchmark P* -1.0%.
    - Japan: Contribution -2.6%; beta 0.47; Policy Gap -5.5%; P -7.4%; P* -7.4%; P_wo 0.1%; P*_wo -3.0%; benchmark P* -1.0%.
    - Netherlands: Contribution 1.2%; beta 0.47; Policy Gap 2.5%; P 0.6%; P* 0.6%; P_wo 0.0%; P*_wo -3.0%; benchmark P* -1.0%.
- Public Health Expenditure:
  - Regression coefficient (beta) used: -0.50 (lagged in estimation; 2013 values shown).
  - P* bench-mark values and fitted regression-derived P* are shown for each country (examples):
    - Australia: Contribution 0.3%; beta -0.50; Policy Gap -0.5%; P 6.0%; P* 6.8%; P_wo 6.0%; P*_wo 6.2%; P* fitted 6.8%.
    - Netherlands: Contribution -1.5%; beta -0.50; Policy Gap 3.0%; P 10.3%; P* 7.5%; P_wo 6.0%; P*_wo 6.2%; P* fitted 7.0%.
- Change in Reserves (∆Reserves)/GDP:
  - Regression coefficient (beta) used: 0.45 (instrumented with K controls).
  - Examples of policy gaps and components:
    - Brazil: Overall contribution 0.4%; beta 0.45; Policy Gap 0.9%; P 0.9%; P* 1.0%; world P_KC -0.1%; world P*_KC -0.1%; components include P, P*, KC, KC*.
    - Malaysia: Overall contribution -1.4%; beta 0.45; Policy Gap -3.0%; P -2.1%; P* 0.8%; KC and KC* components shown.
- Private Credit/GDP (demeaned) coefficient:
  - Beta: -0.021 (Demeaned Private Credit/GDP).
  - Illustrative country values:
    - China: Overall contribution -0.4%; Policy Gap 17.7%; P 43.1%; P* 20.5%; P_wo 28.8%; P*_wo 23.9%.
    - Netherlands: Overall contribution 0.4%; Policy Gap -18.2%; P 79.4%; P* 92.7%; P_wo 28.8%; P*_wo 23.9%.
- Capital Controls:
  - Multiple lagged interaction terms and small coefficients (examples of component betas: 0.05, 0.04, -0.09) interact with PPP GDP per working population and VIX measures.
  - Sample overall contributions: China 0.7%, India 0.8%, Malaysia 0.2%, Mexico 0.3%.

### Cyclical contributions: output gap and ToT interactions (coefficients and selected country contributions)
- Relative output gap coefficient: -0.3846 (applied with trade openness interactions).
- Commodity ToT gap * Trade Openness coefficient: 0.1975.
- Selected country contributions (sum of relative ygap and ToT components, M.C. adjusted Contribution Sum rel. ygap ygap_wo tgap*open etc.; selected examples):
  - Australia: Contribution Sum rel. ygap -1.4%; ToT contribution 0.2%; Combined cyclical contribution entries in first table equal 0.3%.
  - China: Combined cyclical contribution reported as -0.4% in the first table (consistent with relative output gap and ToT interactions shown).
  - Germany: Combined cyclical contribution reported as -0.5% in the first table.
  - Netherlands: Combined cyclical contribution reported as 1.4% in the cyclical derivation table; first table cyclical contribution 1.4%.
  - United States: Combined cyclical contribution in derivation table -0.5%; first table cyclical contributions 0.2% (note multilateral consistency adjustments apply in the first table).

### Regression estimation results and statistical highlights (sample coefficients from EBA CA regression)
- Model specification (1986-2013) — selected coefficients with p-value significance:
  - L. NFA/Y: 0.015** (p-value shown as (0.016))
  - Financial Center Dummy: 0.027*** (0.000)
  - L.Relative output per worker*K openness: 0.046** (0.043)
  - Oil and Natural Gas Trade Balance * resource temporariness: 0.410*** (0.000)
  - GDP growth, forecast in 5 years: -0.425*** (0.000)
  - L.Public Health Spending/GDP: -0.503*** (0.000)
  - L.demeaned VIX*K openness: 0.040** (0.011)
  - Own currency’s share in world reserves: -0.041*** (0.000)
  - Output Gap: -0.385*** (0.000)
  - Commodity ToT gap * Trade Openness: 0.197*** (0.000)
  - Safer Institutional/Political Environment (index): -0.109*** (0.000)
  - Demeaned Private Credit/GDP: -0.021*** (0.005)
  - Cyclically adjusted Fiscal Balance, instrumented: 0.470*** (0.000)
  - (∆Reserves)/GDP * K controls, instrumented: 0.449** (0.024)
  - rel. Dependency Ratio*Aging Speed: 0.130*** (0.000)
  - rel. Aging Speed * Dependency Ratio: 0.088** (0.039)
  - Constant: -0.014*** (0.000)
- Estimation sample and fit:
  - Observations: 1,197
  - Number of countries: 49
  - Root MSE: 0.032
  - P-values of Het-corrected z-statistics provided; significance denoted as * 10%, ** 5%, *** 1%. Variables denoted with ＃ are constructed relative to a GDP-weighted country sample average in each year. "L." denotes one year lag.

*Source: 2015 EBA regression-based analysis of 2014 current accounts (EBA — Spring 2015 data and methodology).*

### Section II—REER Regression-based Analysis: Index REER

### Section II—REER Regression-based Analysis: Index REER

### Overview and methodology
- Analysis: 2015 EBA’s analysis of 2014 (year average) REER index values, using data available as of Spring 2015.
- Estimation sample: extended to 2013 (rather than 2010) relative to the methodology and regression specification in IMF Working Paper 13/272.
- Memo reference: May’15.
- Total REER Gap definition: sum of (A) contributions of policy gaps and (B) the regression residual. The regression residual requires additional interpretation outside of the EBA methodology.
- For multilateral consistency, adjusted by the weighted average of the 2014 regression residuals (subtracting -1.8%).

### Key aggregate statistics (model fit)
- Observations: 882
- R-squared: 0.61
- RMSE: 0.08271

### Main regression coefficients (EBA Analysis of 2014 Index REER: Coefficients)
- Change in reserves to GDP * cap controls (rel to TRD PRT): -1.73*** (0.00)
- Lag of health expenditure to GDP (rel to TRD PRT): 1.23 (0.11)
- Real interest rate differential interacted with K openness (rel to TRD PRT): 0.66*** (0.00)
- Private credit/GDP (rel to TRD PRT): 0.13*** (0.00)
- Lag of Demeaned GDPpw/Top3GDPpw (PPP): 0.70*** (0.00)
- Lag of Demeaned GDPpw/Top3GDPpw (PPP) * capital openness: -0.49*** (0.00)
- Lag of VIX * capital account openness: -0.26*** (0.00)
- Lag of VIX * capital account openness * share of own currency in global reserve: 0.84** (0.02)
- Share of the country's currency held as FX reserve by central banks worldwide: 0.04 (0.54)
- Lagged financial home bias (share of domestic debt owned by residents, rel to TR): 0.37*** (0.00)
- Log commodity Terms Of Trade: 0.09* (0.06)
- Lag of Trade Openness (avg. of exports and imports to GDP) (rel to TRD PRT): -0.30*** (0.00)
- Expected GDP growth of medium-term (5 years out), WEO project (rel to TRD PRT): 1.86*** (0.00)
- Population Growth (rel to TRD PRT): 0.86 (0.61)
- Share of administered prices: -2.12*** (0.00)
- Dummy south africa apartheid (pre-1994): 0.31*** (0.00)
- Constant: 4.33*** (0.00)
- Robust pval in parentheses. *** p<0.01, ** p<0.05, * p<0.1.

### Total REER Gaps — selected country values (Total = A + B from summary table)
- Australia: 10.8%
- Belgium: 7.1%
- Brazil: -3.1%
- Canada: -0.5%
- China: -6.5%
- France: -1.1%
- Germany: 7.3%
- India: 1.3%
- Indonesia: -9.8%
- Italy: 2.9%
- Japan: -26.3%
- Korea: 0.1%
- Malaysia: -21.2%
- Mexico: -10.3%
- Netherlands: -1.4%
- Poland: -2.4%
- Russia: -12.6%
- South Africa: -22.8%
- Spain: 13.3%
- Sweden: -10.3%
- Switzerland: 11.3%
- Thailand: -2.2%
- Turkey: 6.4%
- United Kingdom: 5.6%
- United States: 2.3%
- Euro Area: 4.6%

### Net contributions of policy gaps and residuals — selected country breakdowns (from memo: REER, % dev. from 2014 avg. REER (GDS))
- Australia: Total policy contributions sum and residual: Total -1.3%; Residual -1.0% (domestic and subcomponents shown in tables).
- Brazil: Total -3.6%; Residual -3.4%.
- China: Total -7.5%; Residual -7.3%.
- India: Total -11.2%; Residual -10.9%.
- Japan: Total -1.1%; Residual -1.0%.
- Mexico: Total -5.0%; Residual -4.4%.
- Spain: Total 4.5%; Residual 5.1%.
- Switzerland: Total 2.3%; Residual 3.0%.
- United States: Total 1.0%; Residual 0.8%.

(Note: the table shows Total, Domestic (Dom.), and component contributions by policy category for each country; above are selected Total values and Total Residual/Domestic where shown.)

### Breakdown of policy-gap contributions by policy type (high-level findings)
- Public Expenditure on Health / GDP:
  - Coefficient (Lag of health expenditure to GDP): 1.23.
  - Examples of country-level contributions:
    - China: contribution -6.8% (Total), domestic -6.0%.
    - India: contribution -8.7% (Total), domestic -8.0%.
    - United States: contribution 0.0% (Total), domestic 0.0%.
  - Countries with large positive benchmark health shares: Switzerland 63.1%; United States 56.5%.

- Capital Controls / Capital Account Openness:
  - Overall contribution examples:
    - Malaysia: overall contribution 5.4% (coef -1.73 reported in component table).
    - Brazil: overall contribution -1.8%.
    - China: overall contribution -2.3%.
  - P is defined as: Change in reserves to GDP * Capital Controls.
  - Capital Controls benchmark shares reported (examples): Brazil 25.0%; China 50.0%; India 50.0%; Indonesia 37.5%.

- Change in FX Reserves / GDP:
  - Coefficient reported: Change in reserves to GDP * cap controls = -1.73***.
  - Examples of overall contributions:
    - China: 2.9% (overall contribution).
    - Spain: 2.8% (overall contribution).
    - Netherlands: -2.2% (overall contribution).
  - Component shares: e.g., Australia reserves to GDP 51.2% (P), Belgium 25.0% (P), China 43.1% (P).

- Private Credit / GDP (after removing country mean):
  - Coefficient: 0.13***.
  - Examples of overall contributions:
    - Switzerland: 1.6%.
    - Belgium: 0.8%.
    - Japan: -1.0%.
    - Russia: -1.5%.

- Real Short Term Interest Rates (interacted with capital openness):
  - Coefficient: 0.66***.
  - The real interest rate accounts for the estimated effect of Q.E. for Japan, U.S. and U.K.
  - Examples of country-level net contributions to REER via real rates and interactions are provided in the country-by-country tables (e.g., Korea, Netherlands, etc.).

### Tables and components provided (structure)
- Summary table: Total REER Gap = contributions of policy gaps + regression residual (with domestic subcomponents).
- Second table: breaks down policy gap contributions into 5 policy types covered by EBA’s REER regression-based analysis, with domestic vs. trading-partner subcomponents.
- Subsequent pages: detailed country-level estimated policy gaps and component calculations (coefficients, P, P*, P(trading partners), P*(trading partners), policy gap = (1)-(3) - {(2)-(4)}).

*International Monetary Fund — EBA Analysis of 2014 Index Real Effective Exchange Rates (2015 estimates, Section II).*

### Section III—REER Regression-based Analysis: Level REER

### Section III—REER Regression-based Analysis: Level REER

### Purpose and methodology
- EBA’s analysis of 2014 (year average) REERs, using data available as of Spring 2015.
- Dependent variable: level measure of a country’s real exchange rate (as opposed to an REER index that omits cross-country price level differences).
- Independent variables: similar to those used in the Index REER analysis; two regression specifications are not identical.
- Multilateral consistency adjustment: adjusted by the weighted average of the 2014 regression residuals (subtracting -8%).

### Key regression coefficients and model statistics (EBA Analysis of the 2014 Level of the REER)
- Change in reserves to GDP * cap controls (rel to TRD PRT): -2.16* (0.08)
- Lag of health expenditure to GDP (rel to TRD PRT): 1.79** (0.04)
- Private credit/GDP (rel to TRD PRT): 0.12*** (0.01)
- Lag Demeaned PPPGDP/Top3(PPP): 0.16*** (0.00)
- Lag of VIX * capital account openness: -0.33** (0.02)
- Lag of VIX * capital account openness * share of own currency in global reserve: 0.98 (0.12)
- Share of the country's currency held as FX reserve by central banks worldwide: -0.33*** (0.00)
- Lag of Trade Openness (avg. of exports and imports to GDP) (rel to TRD PRT): -0.31*** (0.00)
- Expected GDP growth of medium-term (5 years out), WEO project (rel to TRD PRT): 1.83** (0.05)
- Population Growth (rel to TRD PRT): 5.59** (0.02)
- Aging Speed (rel to TRD PRT): 0.68*** (0.01)
- Dependency Ratio (rel to TRD PRT): 0.89*** (0.00)
- ICRG political risk variable (rel to TRD PRT): 0.44*** (0.00)
- NFA/GDP: 0.11*** (0.00)
- Lag Capital stock per employed person at current PPPs (2005US$) (rel to TRD PRT): 0.08*** (0.00)
- Lag Ratio Traded/Non Traded relative to trd part (in logs): 0.23*** (0.00)
- VAT Revenue, % of GDP (rel to TRD PRT): 1.21** (0.03)
- Log Commodity ToT (43) levels in 2011 vs trading partner: 0.06*** (0.00)
- Real interest rate differential demeaned interacted with K openness (rel to TRD): 0.94** (0.02)
- Share of administered prices in CPI: -2.62*** (0.00)
- Constant: 0.19*** (0.00)
- Observations: 838
- R-squared: 0.91
- RMSE: 0.1409
- Number of Countries: 39
- Robust pval in parentheses; significance: *** p<0.01, ** p<0.05, * p<0.1

### Selected country-level estimated REER gaps and net policy-gap contributions (Total REER Gap (C = A+B) and Net Contributions of Policy Gaps; residuals shown where provided)
- Australia: Sum (A) 18.4%; Total REER Gap -1.8%; Net contributions across components include Health Exp. -1.8%, Capital Control -1.3%, Reserves 0.0%, Private Credit 0.1%, Real Interest Rate -0.5%, Residual 20.1%.
- Belgium: Sum (A) 10.5%; Total REER Gap 0.2%; Net contributions include Health Exp. 0.2%, Capital Control -0.3%, Reserves 0.0%, Private Credit 0.1%, Real Interest Rate -0.5%, Residual 10.2%.
- Brazil: Sum (A) 13.5%; Total REER Gap -3.1%; Net contributions include Health Exp. -3.1%, Capital Control 0.2%, Reserves -0.2%, Private Credit -2.1%, Real Interest Rate -0.4%, Residual 16.6%.
- Canada: Sum (A) -10.6%; Total REER Gap -0.5%; Net contributions include Health Exp. -0.5%, Capital Control -0.1%, Reserves 0.0%, Private Credit 0.1%, Real Interest Rate -0.4%, Residual -10.1%.
- China: Sum (A) 6.8%; Total REER Gap -3.5%; Net contributions include Health Exp. -3.5%, Capital Control -3.2%, Reserves -0.9%, Private Credit -1.3%, Real Interest Rate 2.6%, Residual 10.3%.
- Germany: Sum (A) -15.9%; Total REER Gap 0.7%; Net contributions include Health Exp. 0.7%, Capital Control -0.1%, Reserves 0.0%, Private Credit 0.1%, Real Interest Rate -0.4%, Residual -16.6%.
- India: Sum (A) 4.8%; Total REER Gap -4.3%; Net contributions include Health Exp. -4.3%, Capital Control 0.5%, Reserves -0.9%, Private Credit -1.9%, Real Interest Rate 0.0%, Residual 9.1%.
- Japan: Sum (A) -21.0%; Total REER Gap -1.2%; Net contributions include Health Exp. -1.2%, Capital Control 0.9%, Reserves 0.0%, Private Credit 0.2%, Real Interest Rate -0.8%, Residual -19.8%.
- Korea: Sum (A) -13.7%; Total REER Gap -2.5%; Net contributions include Health Exp. -2.5%, Capital Control -1.1%, Reserves 0.0%, Private Credit 0.3%, Real Interest Rate -1.9%, Residual -11.2%.
- Switzerland: Sum (A) 12.6%; Total REER Gap 2.8%; Net contributions include Health Exp. 2.8%, Capital Control -0.1%, Reserves 0.0%, Private Credit 0.1%, Real Interest Rate 0.7%, Residual 9.7%.
- Turkey: Sum (A) 17.0%; Total REER Gap -1.7%; Net contributions include Health Exp. -1.7%, Capital Control 0.0%, Reserves -0.2%, Private Credit 0.3%, Real Interest Rate -0.4%, Residual 18.7%.
- United States: Sum (A) 8.2%; Total REER Gap 1.5%; Net contributions include Health Exp. 1.5%, Capital Control 1.4%, Reserves 0.0%, Private Credit 0.2%, Real Interest Rate -0.1%, Residual 6.8%.
- Euro Area aggregate: Sum (A) -0.3%; Total REER Gap 0.9%; Net contributions include Health Exp. 0.9%, Capital Control 0.5%, Reserves 0.0%, Private Credit 0.1%, Real Interest Rate -0.2%, Residual -1.3%.

(Note: the source provides detailed breakdowns by component—Health Exp., Capital Controls, ∆ in Reserves, Private Credit, Real Interest Rate—and residuals for all listed countries.)

### Component-specific breakdowns (high-level points drawn from tables)
- Public Expenditure on Health / GDP:
  - Lagged fitted coefficient: 1.79 used to compute contributions; many countries show negative policy-gap contributions from public health spending (e.g., China -0.9%, India -0.9%, Malaysia -0.6%).
  - United States shows a health expenditure contribution of 0.0% with P benchmark at -7.8% and contribution -4.9% in one column.
- Capital Controls (and VIX interaction):
  - Capital account openness interacts with VIX and reserve shares; coefficients and contributions vary widely (e.g., Brazil capital-control-related contribution -2.1%, China -1.3%, Malaysia 6.5%).
  - P is defined as: Change in reserves to GDP * Capital Controls.
- Change in FX Reserves / GDP:
  - Coefficient: Change in reserves to GDP * cap controls has coefficient -2.16* in the regression output.
  - Examples of overall contributions: China 2.6% (P 21.8%), Netherlands -2.0% (P -16.7%), Spain 2.5% (P 20.9%).
- Private Credit / GDP:
  - Coefficient: 0.12***.
  - Country contributions vary: Switzerland 2.2% overall contribution, Netherlands -2.4%, India -2.0%, Russia -2.2%.
- Real Short Term Interest Rates:
  - Real interest rate differential demeaned interacted with capital openness coefficient: 0.94**.
  - The real interest rate accounts for the estimated effect of Q.E. for Japan, U.S. and U.K.

### Section IV — External Sustainability Analysis (ES approach)
### Purpose and method summary
- ES approach (CGER methodology) used where stabilizing an economy’s net external position is a dominant concern.
- ES calculates the CA/GDP adjustment consistent with stabilizing NFA/GDP at a benchmark level (second column).
- For most countries the NFA/GDP benchmark is set at the recent (2013) actual level (first column); for select economies the benchmark is modified (regional averages or other criteria).
- Method steps:
  1. Calculate CA/GDP that would stabilize NFA/GDP at the benchmark level.
  2. Compare WEO-projected (2019) CA/GDP (assuming real exchange rates constant at early 2015 levels, current policies including those effective between 2015–2020, and adjusted for closed output gaps) with the NFA-stabilizing CA/GDP.
- The highlighted column in the original tables reports the CA gap: adjusted CA projected for 2020 minus CA that would stabilize NFA/GDP at the benchmark level.
- ES gaps are aimed at sustainability questions and are not directly comparable to CA or REER regression-based gaps.

### Selected ES results: 2013 NFA/GDP benchmark, adjusted CA projections, and CA/GDP gaps (D) - (E)
- Australia: 2013 NFA/GDP -54.1%; Benchmark -54.1%; Unadjusted medium-term CA/GDP -3.3%; Adjusted medium-term CA/GDP -3.1%; CA/GDP stabilizing NFA at Benchmark -2.6%; CA/GDP Gap -0.6%
- Belgium: 2013 NFA/GDP 39.7%; Benchmark 39.7%; Unadjusted medium-term CA/GDP 2.2%; Adjusted medium-term CA/GDP -0.9%; CA/GDP stabilizing NFA at Benchmark 0.4%; CA/GDP Gap -1.3%
- Brazil: 2013 NFA/GDP -34.1%; Benchmark -34.1%; Unadjusted medium-term CA/GDP -3.2%; Adjusted medium-term CA/GDP -5.1%; CA/GDP stabilizing NFA at Benchmark -1.2%; CA/GDP Gap -4.0%
- Canada: 2013 NFA/GDP 1.2%; Benchmark 1.2%; Unadjusted medium-term CA/GDP -2.1%; Adjusted medium-term CA/GDP -2.1%; CA/GDP stabilizing NFA at Benchmark -0.6%; CA/GDP Gap -1.5%
- China: 2013 NFA/GDP 17.6%; Benchmark 17.6%; Unadjusted medium-term CA/GDP 3.1%; Adjusted medium-term CA/GDP 3.2%; CA/GDP stabilizing NFA at Benchmark 0.3%; CA/GDP Gap 2.9%
- Euro Area: 2013 NFA/GDP -15.1%; Benchmark -6.9%; Unadjusted medium-term CA/GDP 2.6%; Adjusted medium-term CA/GDP 3.1%; CA/GDP stabilizing NFA at Benchmark 0.6%; CA/GDP Gap 2.6%
- India: 2013 NFA/GDP -27.1%; Benchmark -27.1%; Unadjusted medium-term CA/GDP -2.2%; Adjusted medium-term CA/GDP -2.2%; CA/GDP stabilizing NFA at Benchmark -2.1%; CA/GDP Gap -0.1%
- Japan: 2013 NFA/GDP 67.0%; Benchmark 67.0%; Unadjusted medium-term CA/GDP 2.2%; Adjusted medium-term CA/GDP 2.2%; CA/GDP stabilizing NFA at Benchmark 2.1%; CA/GDP Gap 0.1%
- Netherlands: 2013 NFA/GDP 39.9%; Benchmark 39.9%; Unadjusted medium-term CA/GDP 9.5%; Adjusted medium-term CA/GDP 6.2%; CA/GDP stabilizing NFA at Benchmark 0.7%; CA/GDP Gap 5.5%
- Poland: 2013 NFA/GDP -68.9%; Benchmark -68.9%; Unadjusted medium-term CA/GDP -1.8%; Adjusted medium-term CA/GDP -1.6%; CA/GDP stabilizing NFA at Benchmark -3.8%; CA/GDP Gap 2.2%
- Russia: 2013 NFA/GDP 4.6%; Benchmark 4.6%; Unadjusted medium-term CA/GDP 4.8%; Adjusted medium-term CA/GDP 4.9%; CA/GDP stabilizing NFA at Benchmark 2.8%; CA/GDP Gap 2.0%
- Spain: 2013 NFA/GDP -96.8%; Benchmark -48.4%; Unadjusted medium-term CA/GDP 1.3%; Adjusted medium-term CA/GDP 0.1%; CA/GDP stabilizing NFA at Benchmark 0.4%; CA/GDP Gap -0.3%
- Sweden: 2013 NFA/GDP -6.2%; Benchmark 24.0%; Unadjusted medium-term CA/GDP 5.7%; Adjusted medium-term CA/GDP 5.6%; CA/GDP stabilizing NFA at Benchmark 1.2%; CA/GDP Gap 4.4%
- Switzerland: 2013 NFA/GDP 131.7%; Benchmark 131.7%; Unadjusted medium-term CA/GDP 5.3%; Adjusted medium-term CA/GDP 5.5%; CA/GDP stabilizing NFA at Benchmark 7.5%; CA/GDP Gap -2.0%
- Thailand: 2013 NFA/GDP -20.4%; Benchmark -20.4%; Unadjusted medium-term CA/GDP 0.9%; Adjusted medium-term CA/GDP 1.0%; CA/GDP stabilizing NFA at Benchmark -0.6%; CA/GDP Gap 1.6%
- Turkey: 2013 NFA/GDP -55.7%; Benchmark -55.7%; Unadjusted medium-term CA/GDP -5.1%; Adjusted medium-term CA/GDP -5.0%; CA/GDP stabilizing NFA at Benchmark -2.9%; CA/GDP Gap -2.0%
- United Kingdom: 2013 NFA/GDP -2.7%; Benchmark -2.7%; Unadjusted medium-term CA/GDP -3.4%; Adjusted medium-term CA/GDP -3.3%; CA/GDP stabilizing NFA at Benchmark 0.0%; CA/GDP Gap -3.2%
- United States: 2013 NFA/GDP -34.0%; Benchmark -34.0%; Unadjusted medium-term CA/GDP -2.6%; Adjusted medium-term CA/GDP -2.6%; CA/GDP stabilizing NFA at Benchmark -1.5%; CA/GDP Gap -1.2%

(Notes: CA includes capital account in addition to current account. Projections are based on WEO database as of June 2nd 2015.)

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_Source: https://www.imf.org/-/media/files/np/res/eba/data/2015estimates.pdf_