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The Role of Macroeconomic Stability in Current Account Balances

Author

Listed:
  • Murat Cetrez

    (Ford Otosan A.S, Istanbul, Turkiye)

  • Yasin Baris Altayligil

    (Istanbul University, Department of Economics, Istanbul, Turkiye)

Abstract

This study aims to find out the role of macroeconomic stability in current account balances. The analysis is completed for the period between 1980 and 2016 for 97 countries. The macroeconomic stability is represented by an index created with the countries’ inflation rate (CPI), growth rate, unemployment rate, and fiscal balance data. It is found that macroeconomic stability is one of the important determinants of current account balances like institutional quality and financial development. It has negative and statistically significant relationships with current account balances for four different country groups: developing countries, all countries except industrial, all countries except industrial and African countries, and all countries. Results show that macroeconomic stability is a crucial determinant for developing countries rather than high-income countries.

Suggested Citation

  • Murat Cetrez & Yasin Baris Altayligil, 2022. "The Role of Macroeconomic Stability in Current Account Balances," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-2), pages 569-597, December.
    • Handle: RePEc:ist:journl:v:72:y:2022:i:2:p:569-597
    DOI: 10.26650/ISTJECON2022-1172316
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    More about this item

    Keywords

    Current account balances; Macroeconomic stability; Panel data analysis JEL Classification: C33 ; F14 ; F41 ; F62;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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