Determinants of Current Account Deficits in Developing Countries

Calderon, Cesar Augusto; Chong, Alberto; Loayza, Norman

doi:10.2202/1534-6005.1021

Cited by 169 publications

(246 citation statements)

References 32 publications

(60 reference statements)

Supporting

Mentioning

216

Contrasting

Unclassified

Order By: Relevance

“…4 Debelle and Faruqee (1996), Calderon, Chong and Loayza (2002) and Chin and Prasad (2003) 5 Debelle and Faruqee (1996) 6 Khan and Knight (1983), Ang & Sek (2011) Debelle and Faruqee, (1996) investigate the factors affecting current account balances by using data of 21 industrial countries over the period of 1971 to 1993.They use panel data regression technique & error correction model. Results show that capital controls, terms of trade and fiscal surplus do not play a significant role in the variation of a current account in long term, while government debt, relative income and demographic have significant effect on current account balance.…”

Section: Empirical Studiesmentioning

confidence: 99%

“…They also conclude that the changes in fiscal policy, movements in terms of trade, state of business cycle and the real exchange rate are the factors which having the significant impact on current account balance in short term. Calderon et al (2002) analyze the link between a broad set of economic variable and current account deficit in developing countries by using the data of 44 developing countries over the period of 1966 to 1994. Panel regression results indicate that the increase in domestic output growth, movement in terms of trade, rising real exchange rate will lead to higher current account deficit.…”

Section: Empirical Studiesmentioning

confidence: 99%

See 1 more Smart Citation

Dynamics of Current Account Deficit: A Lesson from Pakistan

Jawaid

Raza

2012

Transit Stud Rev

View full text Add to dashboard Cite

This study investigates the determinants of current account deficit in Pakistan by using the annual time series data for the period 1976 to 2010. The cointegration results suggest the positive and significant long run relationship of current account deficit with exchange rate, trade deficit and fiscal deficit, while significant negative relationship is found with external debt and private saving. The error correction model also confirms the significant positive relationship of current account deficit with exchange rate, trade deficit and fiscal deficit in short run. The Grangercausality test shows the bidirectional causality run from exchange rate and external debt to current account deficit. However, unidirectional causality is found from current account deficit to external debt and fiscal deficit. It is recommended that government needs to be cautious in financing its fiscal deficit. Savings habits should be increase to narrow the investment gap in economy.

show abstract

Section: Empirical Studiesmentioning

confidence: 99%

Section: Empirical Studiesmentioning

confidence: 99%

Dynamics of Current Account Deficit: A Lesson from Pakistan

Jawaid

Raza

2012

Transit Stud Rev

View full text Add to dashboard Cite

show abstract

“…Akram (2004) includes petroleum wealth in the calculation of a fundamental equilibrium real exchange rate (FEER) for Norway and shows that different assumptions about wealth affect the FEER estimate. While a number of papers have considered the fundamental determinants of current account balances across a wide range of countries (Calderon, Chong andLoyoza, 2002, andChinn andPrasad, 2000), this paper's objective of associating historical movements in the non-oil current account to measures of wealth and cash flow has not previously been done.…”

Section: Introductionmentioning

confidence: 99%

Today Versus tomorrow: The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income

Thomas

Bayoumi²

2009

IMF Working Papers

View full text Add to dashboard Cite

show abstract

“…Indeed, we use a variety of theoretical models to drive our estimation strategy and to provide guidance on the expected sign of the coe¢ cients. In particular, we build upon the work of Debelle and Faruqee (1996), Calderon et al (2002), Chinn and Prasad (2003), Doisy and Hervé (2003), Bussière et al (2006), Zanghieri (2004), Gruber and Kamin (2005) …”

Section: Potential Determinants Of Current Accountsmentioning

confidence: 99%

Thousands of Models, One Story: Current Account Imbalances in the Global Economy

Zorzi¹,

Dieppe²,

Chudík³

2011

gwp

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe global …nancial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any …rm conclusion. We explore three alternative econometric strategies: examining all models, selecting a few, and combining them all. Out of thousands (or indeed millions) of models a story emerges. Prior to the …nancial crisis, current account positions of major economies such as the US, UK, Japan and China were not aligned with fundamentals. Non-technical summary Prior to 2008 some leading economists warned about the potential risks from current account imbalances in the major economies. The …nancial crisis highlighted the key role of country interlinkages as instability spread from the United States to the rest of the world, though not via the exchange rate channel, as had been expected. Subsequently there has been an important debate on whether current account imbalances are an important factor for emergence of bubbles and the transmission of …nancial crisis internationally.There are di¤erent approaches to assess current account imbalances. The classic theoretical approach to model current accounts is based on an intertemporal optimization. This methodology has been criticized for not being validated empirically. Therefore, the standard intertemporal current account model has been extended in many directions by introducing additional relevant factors that could a¤ect consumptions and savings decisions. Di¤erent models, however, point to di¤erent predictions on the relevant current account determinants. This choice could be arbitrary and in ‡uence the overall assessment.In this paper we show that there are potentially thousands (or even million) of plausible current account models, depending on the choice of fundamentals. We therefore look for robust conclusions following three di¤erent econometric strategies. The …rst consists in examining all possible models and verifying if there are some common features which could be identi…ed across all of them. The second route aims at choosing the best model based on both economic and statistical criteria. A …nal third route considers the information content of all models by applying Bayesian model combination techniques. We explore a particularly simple and appealing approach that is not dependent on any theoretical priors.All three...

show abstract

Determinants of Current Account Deficits in Developing Countries

Abstract: In developing countries, increases in current accountAccount Deficits in deficits tend to be associated Developing Countrieswith a rise in domestic output growth and shocks that increase the terms of trade

Cited by 169 publications

References 32 publications

Dynamics of Current Account Deficit: A Lesson from Pakistan

Dynamics of Current Account Deficit: A Lesson from Pakistan

Today Versus tomorrow: The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income

Thousands of Models, One Story: Current Account Imbalances in the Global Economy

Contact Info

Product

Resources

About