Financial Factors: These variables tries to capture the financial situation of a country. The
variables are: the amount of a currency held as reserves by foreign countries, capital
openness and risk aversion of a country affect the CA
Cyclical/temporary factors: The variables are temporary effects caused by changes in the
relative output gap and the terms of trade. They seek to incorporate that the data might be
affected by temporary factors, causing the country to be out of balance.
D Policy-related regressors: Four variables are included under this headline. They all try to
catch the effects of the policies conducted in a country to make it possible to determine to
which degree these cause CA gaps. The four policies included are: fiscal policy (cyclicaladjusted fiscal balance), social protection policy (level of public spending to GDP), FX
interventions (changes in FX reserves) and capital control (not included as a direct
regressor, but as an interaction term with the change in reserves).