Trade Openness and Current Account Adjustment in CIS Economies: Evidence from a Panel Threshold Model

This study investigates the relationship between trade openness and current account adjustment in the economies of the Commonwealth of Independent States (CIS). Using panel data for nine CIS economies over the period 1995–2024, the analysis employs the Hansen (1999) panel threshold model to examine whether the impact of trade openness on current account balances varies across different regimes of trade integration. The estimated threshold occurs at approximately 98.6 percent of GDP, indicating that the effect of trade openness on the current account balance becomes significantly stronger once trade integration exceeds this level. While trade openness has a limited effect below the threshold, higher levels of trade integration are associated with a deterioration in external balances. These findings highlight the importance of accounting for nonlinear adjustment mechanisms when analyzing external balance dynamics in transition economies and suggest that policies aimed at export diversification and strengthening domestic production capacity may contribute to improving external sustainability.