Patterns of Current Account Adjustment—Insights from Past Experience

Algieri, Bernardina; Bracke, Thierry

doi:10.1007/s11079-009-9126-8

Cited by 25 publications

(35 citation statements)

References 22 publications

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“…Compared with the international experience with current account reversals summarised above, it thus appears that the South African experience falls squarely in the “internal adjustment” category as identified by Algieri and Bracke (), i.e. most of the adjustment via declines in domestic demand (and thus imports) and very little from exchange rate adjustment (and thus exports) .…”

Section: South Africa's Experiencementioning

confidence: 95%

“…The IMF study quoted above, for example, reported on one subgroup with a median 3.5% GDP growth slowdown and a median 8% real exchange rate depreciation, and another with a median 0.75% increase in GDP growth and a median 18% depreciation. In a study that was explicitly designed to provide for this diversity in current account reversal experiences, Algieri and Bracke () used cluster analysis to identify different patterns of experience by countries. They identified three broad groups on the basis of their output and exchange rate experiences.…”

Section: International Experiencementioning

confidence: 99%

“…See Guidotti et al . () for a discussion on empirical definitions for sudden stops, and Algieri and Bracke () for a listing of such definitions for current account reversals.…”

mentioning

confidence: 99%

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Sudden Stops and Current Account Reversals: Potential Macroeconomic Consequences for South Africa

Smit

Grobler

Nel³

2014

South African J Economics

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South Africa is one of the emerging market countries that have received a relatively large amount of foreign capital since the mid-2000s. In South Africa's case, these inflows were partly used to build the country's foreign exchange reserves, but more particularly to finance continued large current account deficits. During the course of the past two years, however, adverse domestic political developments, combined with the potential negative impacts of the unwinding of quantitative easing policies and the normalising of monetary policy in the United States on emerging markets in general, has raised the spectre of a sharp slowdown in foreign capital flows to South Africa and an associated reversal of the current deficit. This paper explores the potential impact of such a development on macroeconomic conditions in South Africa. The analysis consists of macroeconometric model-based alternative scenarios backed up by both the international evidence on the impact of such events and South Africa's own history. JEL Classification: F32, F41, F47, E1

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Section: South Africa's Experiencementioning

confidence: 95%

Section: International Experiencementioning

confidence: 99%

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Sudden Stops and Current Account Reversals: Potential Macroeconomic Consequences for South Africa

Smit

Grobler

Nel³

2014

South African J Economics

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“…Following Chinn and Wei (2013), we define three groups of exchange rate regimes: the fixed exchange rate regime corresponds to the first 4 categories of the fine grid in Reinhart and Rogoff (2004) and ranges from "no legal 6 A list of the countries in the sample is reported in 7 We used a linear interpolation method as part of which the last observation was matched to the source data. 8 As Algieri andBracke (2011) andIMF (2007) highlight, this criterion allows for a larger sample size compared to approaches that require the initial current account deficit to exceed a given magnitude. In a robustness check, we restrict the sample to reversals with an initial deficit larger than 2% of GDP as in Freund (2005) and find that our main results are qualitatively unchanged.…”

Section: Introductionmentioning

confidence: 99%

“…9 As in Algieri and Bracke (2011), we use the country specific standard deviation rather than a fixed threshold in order to take account of country heterogeneity in current account dynamics. The highest current account standard deviation is in Norway (7.8%) while the lowest in France (1.2%)…”

Section: Introductionmentioning

confidence: 99%

Current Account Reversals in Industrial Countries: does the Exchange Rate Regime Matter?

Pancaro

Saborowski

2015

Int. J Fin Econ

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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. All rights reserved. Terms of use: Documents in ISSN 1725-2806 (online) EU Catalogue NoQB-AR-13-044-EN-N (online)Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the ECB or the authors. Abstract This paper studies current account reversals in industrial countries across different exchange rate regimes. There are two major findings which have important implications for industrial economies with external imbalances: first, triggers of current account reversals differ between exchange rate regimes. While the current account deficit and the output gap are significant predictors of reversals across all regimes, reserve coverage, credit booms, openness to trade and the US short term interest rate determine the likelihood of reversals only under more rigid regimes. Conversely, the real exchange rate affects the probability of experiencing a reversal only under flexible arrangements. Second, current account reversals in advanced economies do not have an independent effect on growth. This result holds not only for industrial economies in general but also for countries with fixed exchange rate regimes in particular.Keywords: Current account, reversals, exchange rate regime JEL Classification: F32, F41 Non-Technical SummarySharp external adjustments that lead to a sustained current account improvement are commonly referred to as current account reversals. Reversals have been analyzed intensively in the literature, typically with a focus on the channels through which they are achieved as well as on the question whether they have implications for real economic performance. However, one aspect that has received only limited attention is the relationship between current account reversals and exchange rate regimes, an aspect that is especially timely with regard to the existing external imbalances within the Euro area. The present paper contributes to this strand of the literature by presenting a systematic analysis of current account reversals across different de-facto exchange rate regimes in industrial countries. In particular, it examines whether current account reversals follow different patterns depending on the exchange rate regime in place.Moreover, it identifies triggers of reversals and examines the link between reversals and growth across different exchange rate regimes. The analysis focuses precisely on...

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An Assessment of India’s Current Account Sustainability and Adjustment: A Nonlinear Framework

Kulkarni

2022

India Studies in Business and Economics

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Patterns of Current Account Adjustment—Insights from Past Experience

Abstract: External imbalances, Current account adjustment, Cluster analysis, Multinomial logit, Expenditure switching, Expenditure reduction, F32, C14, C25,

Cited by 25 publications

References 22 publications

Sudden Stops and Current Account Reversals: Potential Macroeconomic Consequences for South Africa

Sudden Stops and Current Account Reversals: Potential Macroeconomic Consequences for South Africa

Current Account Reversals in Industrial Countries: does the Exchange Rate Regime Matter?

An Assessment of India’s Current Account Sustainability and Adjustment: A Nonlinear Framework

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