Search results for "Current account"
showing 10 items of 27 documents
Structural and Cyclical Factors behind Current- Account Balances
2010
Global external imbalances widened persistently over the last several years and have narrowed abruptly over the course of the financial crisis. Understanding the extent to which structural or cyclical factors may have driven these patterns is important to assess the likely evolution of global imbalances going forward, as well as the potential adjustment that can be achieved through changes in policy. This paper assesses the link between structural and cyclical factors and current-account balances using a panel of 94 countries from 1973 to 2008. We find that the medium-term evolution of global external imbalances can be related in large part to structural factors including cross-country diff…
Testing for external sustainability under a monetary integration process. Does the Lawson doctrine apply to Europe?
2015
Monetary integration, and more specifically, the creation of a monetary union in Europe, raises new economic questions concerning its functioning and governance. In particular, we focus on the implications of high and persistent current account deficits for the economic performance of monetary union members in the medium term. Recent literature has argued that conventional measures of external sustainability are misleading because they omit the effects of capital variations on net foreign asset positions due to, among others, stock or debt market crises. In this paper we revisit external sustainability making use of the database developed by Lane and Milesi-Ferretti (2007) that includes the…
Banking Crises and Short and Medium Term Output Losses in Emerging and Developing Countries: The Role of Structural and Policy Variables
2012
The aim of this paper is to assess the dynamic impact of banking crises on output for a panel of developing economies. Using an unbalanced panel of 159 countries from 1970 to 2006, the paper shows that banking crises produce significant output losses. Output losses are larger for relatively richer economies, characterized by a higher level of financial deepening and larger current account imbalances. Flexible exchange rates, fiscal and monetary policy, and liquidity support policies have been found to attenuate the effect of the crises. © 2012 Elsevier Ltd.
The Effect of Nominal Exchange Rate Volatility on Real Macroeconomic Performance in the CEE Countries
2011
Working Paper Gate 09-34; International audience; This paper analyzes the relation between nominal exchange rate volatility and several macroeconomic variables, namely real per output growth, excess credit, foreign direct investment (FDI) and the current account balance, in the Central and Eastern European EU Member States. Using panel estimations for the period between 1995 and 2008, we find that lower exchange rate volatility is associated with higher growth, higher stocks of FDI, higher current account deficits, and higher excess credit. The results are economically and statistically significant, and robust.
On the severity of economic downturns: Lessons from cross-country evidence
2012
Abstract We measure the severity of recessions as a function of their amplitude and duration. Within a quantile regression framework, we assess what causes economic downturns to be more or less severe. We find that the most severe downturns have striking similarities regarding cumulated domestic credit and large current account deficits.
Producer Services and the Current Account
2022
Abstract In this paper, we present evidence that countries which experienced a larger expansion of services as a share of GDP in recent years exhibited lower current account balances. We argue that this relationship is compatible with the notion that producer services raise aggregate productivity by enhancing increasing returns to specialization, and we develop a model in which the deregulation of the services industry results in higher GDP growth, a reallocation of resources into the services industry, and a temporary current account deficit. We demonstrate that our theoretical argument is supported by the data, even if we control for a multitude of other factors that potentially affect th…
Trade Costs, Trade Balances, and Current Accounts: an application of Gravity to Multilateral Trade
2005
In this paper we test the well-known hypothesis of Obstfeld and Rogoff (NBER Macroeconomics Annual 7777:339–390, 2000) that trade costs are the key to explaining the so-called Feldstein–Horioka puzzle. Our approach has a number of novel features. First, we focus on the interrelationship between trade costs, the trade account and the Feldstein–Horioka puzzle. Second, we use the gravity model to estimate the effect of trade costs on bilateral trade and, third, we show how bilateral trade can be used to draw inferences about desired trade balances and desired intertemporal trade. Our econometric results provide strong support for the Obstfeld and Rogoff hypothesis and we are also able to recon…
THE CURRENT ACCOUNT OF THE SPANISH ECONOMY, 1850-2016: WAS IT OPTIMAL?
2019
espanolWe analyse the possible optimality of the path followed by the current account of the Spanish economy over a very long period of almost 170 years (1850-2016), according to the intertemporal approach to the current account and using a present-value model. In particular, from the estimation of a bivariate vector autoregression model for the current account, we attempt to assess the extent to which the latter has been used to smooth private consumption over time in the presence of temporary shocks that the economy might suffer. In general, evidence does not seem to be particularly favourable to the validity of the model over the period of analysis. EnglishAnalizamos la posible optimalid…
Labor and product market reforms and external Imbalances: Evidence from advanced economies
2021
We explore the impact of major labor and product market reforms on current account dynamics using a new “narrative” database of major changes in employment protection for regular workers and product market regulation for non-manufacturing industries covering 26 advanced economies over the past four decades. Our main finding is that product market deregulation is associated with a weakening of the current account, while labor market deregulation is associated with an improvement. These effects are transitory and driven by both saving and investment responses. Labor and product market reforms both have a more positive impact on the current account balance when implemented under weak macroecon…
Current account adjustment and retained earnings
2019
First published online: 04 March 2019 This paper develops a formal strategy to calculate current accounts with retained earnings ( RE) on equity investment and analyzes their adjustment during the global financial crisis. RE are the part of companies' profits which is reinvested and not distributed to shareholders as dividends. International statistical standards treat RE on foreign direct investment and RE on portfolio investment differently: while the former enter the current and financial account, the latter do not. We show that this differential treatment strongly affects current accounts of several advanced economies, frequently referred to as financial centers, with large positions in…