Advanced Search
MyIDEAS: Login

Have domestic or foreign factors driven European external imbalances?

Contents:

Author Info

  • Makin, Anthony J.
  • Narayan, Paresh Kumar

Abstract

This paper examines whether domestic or foreign net saving predominantly influences an economy's international borrowing and lending with reference to the experience of western European economies that have had sizable current account surpluses and deficits since the turn of the century. It proposes that if an international lender country's current account surplus is positively (negatively) related to its real long term interest rate, then foreign (domestic) factors are driving its external imbalance. On the contrary, for a foreign borrower country if its current account deficit is positively (negatively) related to its real long term interest rate, domestic (foreign) factors drive its external imbalance. On this basis, it shows econometrically for major European lender economies, Germany, the Netherlands, Switzerland and Sweden, that external imbalances this decade were mainly determined by foreign factors, though by domestic factors for Norway. For major borrower economies, Italy, Spain, Portugal, Ireland and the United Kingdom, the results were not significant implying that neither domestic nor foreign factors predominated over this time.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V9S-521M666-6/2/3b072fec7385f140d68bacb21c758494
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 30 (2011)
Issue (Month): 3 (April)
Pages: 537-546

as in new window
Handle: RePEc:eee:jimfin:v:30:y:2011:i:3:p:537-546

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: Saving Investment Current account imbalances International borrowing and lending Europe Real interest rates;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Freund, Caroline, 2005. "Current account adjustment in industrial countries," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1278-1298, December.
  2. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476.
  3. Paul Bergin & Steven Sheffrin, . "Interest Rates, Exchange Rates And Present Value Models Of The Current Account," Department of Economics 97-22, California Davis - Department of Economics.
  4. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals, and Sudden Stops," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 1-49, June.
  5. Anthony J. Makin, 2004. "The Current Account, Fiscal Policy, and Medium-Run Income Determination," Contemporary Economic Policy, Western Economic Association International, vol. 22(3), pages 309-317, 07.
  6. Muge Adalet & Barry Eichengreen, 2007. "Current Account Reversals: Always a Problem?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 205-246 National Bureau of Economic Research, Inc.
  7. Ghosh, Atish R & Ostry, Jonathan D, 1995. "The Current Account in Developing Countries: A Perspective from the Consumption-Smoothing Approach," World Bank Economic Review, World Bank Group, vol. 9(2), pages 305-33, May.
  8. Blanchard, Olivier & Giavazzi, Francesco & Sa, Filipa, 2005. "The US Current Account and the Dollar," CEPR Discussion Papers 4888, C.E.P.R. Discussion Papers.
  9. Mansoorian, Arman, 1998. "Habits and durability in consumption, and the dynamics of the current account," Journal of International Economics, Elsevier, vol. 44(1), pages 69-82, February.
  10. Jacques Miniane & Benoît Mercereau, 2004. "Challenging the Empirical Evidence from Present Value Models of the Current Account," IMF Working Papers 04/106, International Monetary Fund.
  11. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
  12. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  13. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:30:y:2011:i:3:p:537-546. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.