A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the NOVA – School of Business and Economics ; It has been argued that real appreciation is at the root of lack of Portuguese competitiveness and consequently current account deficits. Using quarterly data from 1995q1 to 2011q4, this Work Project analyses the determinants of Portuguese's current plus capital account by constructing a VAR model and performing Granger causality tests. The results show that real exchange rate appreciation is not the cause of Portuguese external imbalances but it might have been the other way around. These findings are in accordance with the view of Campos e Cunha in his article “Is the Dutch disease pandemic in the South” (2008).