Sharp reductions in current account deficits An empirical analysis
AbstractWe study determinants and consequences of sharp reductions in current account" imbalances (reversals) in low- and middle-income countries. We try to answer two questions:" first, what triggers reversals? Second, what factors explain how costly reversals are? We find" that both domestic variables, such as the current account balance, openness and the level of" reserves, and external variables, such as terms of trade shocks, US real interest rates and growth" in industrial countries seem to play an important role in explaining reversals in current account" imbalances. We also find some evidence that countries with a less appreciated real exchange" rate, higher investment and openness prior to the reversal tend to grow faster after a reversal" occurs.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 42 (1998)
Issue (Month): 3-5 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- Gian Maria Milesi-Ferrett & Assaf Razin, 1997. "Sharp Reductions in Current Account Deficits: An Empirical Analyis," NBER Working Papers 6310, National Bureau of Economic Research, Inc.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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