Blessed Mary, Forgive Us Our Deficits

Abstract

Many studies have explored the medium-term determinants of current account balances. This paper contributes to the existing literature by introducing religious variables that until now have been omitted. We propose that Catholic countries tend to run current account deficits. This result remains robust even if we include both the official financial flows and the variables measuring the quality of institutions. In total we control for close to all of the variables that have been included in previous studies. To rationalize our result we consulted the World Values Survey and discovered that Roman Catholics do not consider thrift as important as other religious groups.