Advanced Search
MyIDEAS: Login to save this article or follow this journal

Financial markets and the current account: emerging Europe versus emerging Asia

Contents:

Author Info

  • Sabine Herrmann

    ()

  • Adalbert Winkler

Abstract

Financial globalisation has been associated with divergent current account patterns in emerging market economies. While countries in emerging Asia have been running sizeable current account surpluses, countries in emerging Europe have been facing large current account deficits. In this paper we test for the relevance of financial market characteristics in explaining divergent current account patterns in emerging Europe and emerging Asia based on the assumption that both regions constitute two different convergence clubs with the euro area and the US representing the core, respectively. In line with the theoretical literature, we find that better developed and more integrated financial markets increase emerging markets´ ability to borrow abroad. The degree of financial integration within the convergence clubs as well as the extent of reserve accumulation are found to be the most significant factors to explain divergent current account patterns in emerging Europe and emerging Asia. We conclude that the overall character of integration matters for the pattern of current account developments in catching-up economies. --

(This abstract was borrowed from another version of this item.)

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://hdl.handle.net/10.1007/s10290-009-0025-2
Download Restriction: Access to full text is restricted to subscribers.

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 Springer in its journal Review of World Economics.

Volume (Year): 145 (2009)
Issue (Month): 3 (October)
Pages: 531-550

as in new window
Handle: RePEc:spr:weltar:v:145:y:2009:i:3:p:531-550

Contact details of provider:
Postal: Kiellinie 66, D-24105 Kiel
Phone: +49 431 8814-1
Fax: +49 431 8814528
Email:
Web page: http://link.springer.de/link/service/journals/10290/index.htm
More information through EDIRC

Order Information:
Web: http://link.springer.de/orders.htm

Related research

Keywords: F15; F21; O16; O52; O53; Real convergence; Economic integration; Saving and investment; Current account developments; Financial markets; Emerging market economies;

Other versions of this item:

Find related papers by JEL classification:

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. Michael D. Bordo & Marc Flandreau, 2001. "Core, Periphery, Exchange Rate Regimes, and Globalization," NBER Working Papers 8584, National Bureau of Economic Research, Inc.
  2. Mody, Ashoka & Murshid, Antu Panini, 2005. "Growing up with capital flows," Journal of International Economics, Elsevier, vol. 65(1), pages 249-266, January.
  3. Pierre-Olivier & Olivier Jeanne, 2009. "Capital Flows to Developing Countries: The Allocation Puzzle," Working Paper Series WP09-12, Peterson Institute for International Economics.
  4. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2005. "Reaching out : access to and use of banking services across countries," Policy Research Working Paper Series 3754, The World Bank.
  5. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  6. Joshua Aizenman & Jaewoo Lee, 2005. "International reserves: precautionary versus mercantilist views, theory and evidence," Proceedings, Federal Reserve Bank of San Francisco.
  7. Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries," IMF Working Papers 00/46, International Monetary Fund.
  8. René M. Stulz, 2007. "The Limits of Financial Globalization," Journal of Applied Corporate Finance, Morgan Stanley, vol. 19(1), pages 8-15.
  9. Hiro Ito & Menzie Chinn, 2009. "East Asia and Global Imbalances: Saving, Investment, and Financial Development," NBER Chapters, in: Financial Sector Development in the Pacific Rim, East Asia Seminar on Economics, Volume 18, pages 117-150 National Bureau of Economic Research, Inc.
  10. Joshua Aizenman, 2007. "Large Hoarding of International Reserves and the Emerging Global Economic Architecture," NBER Working Papers 13277, National Bureau of Economic Research, Inc.
  11. Jiandong Ju & Shang-Jin Wei, 2007. "Domestic Institutions and the Bypass Effect of Financial Globalization," NBER Working Papers 13148, National Bureau of Economic Research, Inc.
  12. Joseph W. Gruber & Steven B. Kamin, 2005. "Explaining the global pattern of current account imbalances," International Finance Discussion Papers 846, Board of Governors of the Federal Reserve System (U.S.).
  13. Marco E. Terrones & Enrique G. Mendoza & Ceyhun Bora Durdu, 2008. "Precautionary Demand for Foreign Assets in Sudden Stop Economies: An Assessment of the New Mercantilism," 2008 Meeting Papers 56, Society for Economic Dynamics.
  14. Joshua Aizenman & Nancy P. Marion, 2002. "The high demand for international reserves in the Far East: what's going on?," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  15. Frederic Mishkin, 2005. "Is Financial Globalization Beneficial?," NBER Working Papers 11891, National Bureau of Economic Research, Inc.
  16. Mendoza, Enrique G & Quadrini, Vincenzo & Ríos-Rull, José-Víctor, 2007. "Financial Integration, Financial Deepness and Global Imbalances," CEPR Discussion Papers 6149, C.E.P.R. Discussion Papers.
  17. Oded Galor, 2007. "Multiple Growth Regimes-Insights from Unified Growth Theory," Working Papers 2007-8, Brown University, Department of Economics.
  18. Francesco Caselli, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 535-568, 05.
  19. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  20. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
  21. Tang, Helena & Zoli, Edda & Klytchnikova, Irina, 2000. "Banking crises in transition economies : fiscal costs and related issues," Policy Research Working Paper Series 2484, The World Bank.
  22. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
  23. Calderon, Cesar & Chong, Alberto & Loayza, Norman, 2000. "Determinants of current account deficits in developing countries," Policy Research Working Paper Series 2398, The World Bank.
  24. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  25. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
  26. Fry, Maxwell J. & Claessens,Constantijn A. & Burridge, Peter & Blanchet, Marie-Christine, 1995. "Foreign direct investment, other capital flows, and current account deficits : what causes what?," Policy Research Working Paper Series 1527, The World Bank.
  27. Wolff, Guntram B., 2006. "Foreign direct investment in the enlarged EU: do taxes matter and to what extent?," Discussion Paper Series 1: Economic Studies 2006,13, Deutsche Bundesbank, Research Centre.
  28. Maurice Obstfeld and Kenneth Rogoff., 1994. "The Intertemporal Approach to the Current Account," Center for International and Development Economics Research (CIDER) Working Papers C94-044, University of California at Berkeley.
  29. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 147-210.
  30. Herrmann, Sabine & Jochem, Axel, 2005. "Determinants of current account developments in the central and east European EU member states - consequences for the enlargement of the euro area," Discussion Paper Series 1: Economic Studies 2005,32, Deutsche Bundesbank, Research Centre.
  31. Edwards, Sebastian, 2001. "Dollarization: Myths and realities," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 249-265, April.
  32. Menzie D. Chinn & Eswar S. Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," NBER Working Papers 7581, National Bureau of Economic Research, Inc.
  33. Olga Arratibel & Frigyes Ferdinand Heinz & Reiner Martin & Marcin Przybyla & Lucasz Rawdanowicz & Roberta Serafini & Tina Zumer, 2007. "Determinants of growth in the central and eastern European EU member states - a production function approach," Occasional Paper Series 61, European Central Bank.
  34. Paul R. Masson & Tamim Bayoumi & Hossein Samiei, 1995. "International Evidenceon the Determinants of Private Saving," IMF Working Papers 95/51, International Monetary Fund.
  35. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2004. "The US Current Account Deficit and Economic Development: Collateral for a Total Return Swap," NBER Working Papers 10727, National Bureau of Economic Research, Inc.
  36. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
  37. Gregory Mankiw, 1995. "The Growth of Nations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 275-326.
  38. Mileva, Elitza, 2008. "The impact of capital flows on domestic investment in transition economies," Working Paper Series 0871, European Central Bank.
  39. Jonathan David Ostry & Atish R. Ghosh, 1992. "Macroeconomic Uncertainty, Precautionary Savings and the Current Account," IMF Working Papers 92/72, International Monetary Fund.
  40. Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1992. "What Explains Developing Country Growth?," NBER Working Papers 4132, National Bureau of Economic Research, Inc.
  41. Rodrik, Dani, 2007. "How to Save Globalization from Its Cheerleaders," Working Paper Series rwp07-038, Harvard University, John F. Kennedy School of Government.
  42. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2005. "Capital Flows in a Globalized World: The Role of Policies and Institutions," NBER Working Papers 11696, National Bureau of Economic Research, Inc.
  43. Ricardo J. Caballero, 2006. "On the Macroeconomics of Asset Shortages," NBER Working Papers 12753, National Bureau of Economic Research, Inc.
  44. Jiandong Ju & Shang-Jin Wei, 2006. "A Solution to Two Paradoxes of International Capital Flows," NBER Working Papers 12668, National Bureau of Economic Research, Inc.
  45. Sunil Sharma & Woon Gyu Choi & Maria Strömqvist, 2007. "Capital Flows, Financial Integration, and International Reserve Holdings," IMF Working Papers 07/151, International Monetary Fund.
  46. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  47. Barry Eichengreen, 2005. "Global imbalances and the lessons of Bretton Woods," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  48. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  49. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  50. Susan Schadler & Pipat Luengnaruemitchai, 2007. "Do Economists' and Financial Markets' Perspectiveson the New Members of the Eu Differ?," IMF Working Papers 07/65, International Monetary Fund.
  51. Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? a Cross-Sectional and Panel Approach," IMF Working Papers 96/58, International Monetary Fund.
  52. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  53. Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
  54. Nicholas Crafts, 1999. "East Asian Growth Before and After the Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 2.
  55. McKinnon, Ronald I & Pill, Huw, 1997. "Credible Economic Liberalizations and Overborrowing," American Economic Review, American Economic Association, vol. 87(2), pages 189-93, May.
  56. Joshua Aizenman & Daniel Riera-Crichton, 2006. "Real Exchange Rate and International Reserves in the Era of Growing Financial and Trade Integration," NBER Working Papers 12363, National Bureau of Economic Research, Inc.
  57. Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2004. "Current accounts dynamics in OECD and EU acceding countries - an intertemporal approach," Working Paper Series 0311, European Central Bank.
  58. Markus Baltzer & Lorenzo Cappiello & Roberto A. De Santis & Simone Manganelli, 2008. "Measuring financial integration in new EU member states," Occasional Paper Series 81, European Central Bank.
  59. Daniel Leigh & Abdul Abiad & Ashoka Mody, 2007. "International Finance and Income Convergence," IMF Working Papers 07/64, International Monetary Fund.
  60. Richard N. Cooper, 2005. "Living with Global Imbalances: A Contrarian View," Policy Briefs PB05-03, Peterson Institute for International Economics.
  61. David T. Llewellyn, 2002. "An analysis of the causes of recent banking crises," The European Journal of Finance, Taylor & Francis Journals, vol. 8(2), pages 152-175, June.
  62. Barry P. Bosworth & Susan M. Collins, 1999. "Capital Flows to Developing Economies: Implications for Saving and Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 143-180.
  63. Michael P. Dooley & Peter M. Garber & David Folkerts-Landau, 2007. "The Two Crises of International Economics," NBER Working Papers 13197, National Bureau of Economic Research, Inc.
  64. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bussière, Matthieu & Pérez-Barreiro, Emilia & Straub, Roland & Taglioni, Daria, 2010. "Protectionist responses to the crisis – global trends and implications," Occasional Paper Series 110, European Central Bank.
  2. Orszaghova, Lucia & Savelin, Li & Schudel, Willem, 2013. "External competitiveness of EU candidate countries," Occasional Paper Series 141, European Central Bank.
  3. Anton Jevcak & Ralph Setzer & Massimo Suardi, 2010. "Determinants of Capital Flows to the New EU Member States Before and During the Financial Crisis," European Economy - Economic Papers 425, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Schnabl, Gunther & Freitag, Stephan, 2009. "An asymmetry matrix in global current accounts," Working Papers 76, University of Leipzig, Faculty of Economics and Management Science.
  5. Dubravko Mihaljek, 2008. "The financial stability implications of increased capital flows for emerging market economies," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 11-44 Bank for International Settlements.
  6. Gunther Schnabl & Stephan Freitag, 2012. "Reverse Causality in Global and Intra-European Imbalances," Review of International Economics, Wiley Blackwell, vol. 20(4), pages 674-690, 09.
  7. Danica Unevska Andonova & Branimir Jovanovic, 2011. "Sustainability of the Macedonian Current Account," Working Papers 2011-06, National Bank of the Republic of Macedonia.
  8. Gunther Schnabl & Stephan Freitag, 2012. "Determinants of Global and Intra-European Imbalances," Global Financial Markets Working Paper Series 25-2011, Friedrich-Schiller-University Jena.
  9. Ruben Atoyan & Jonathan F Manning & Jesmin Rahman, 2013. "Rebalancing," IMF Working Papers 13/74, International Monetary Fund.
  10. Smith, Constance, 2011. "External Balance Adjustment: An Intra-National and International Comparison," Working Papers 2011-13, University of Alberta, Department of Economics.
  11. Wildmann, Christian, 2010. "What drives portfolio investments of German banks in emerging capital markets?," Discussion Paper Series 2: Banking and Financial Studies 2010,04, Deutsche Bundesbank, Research Centre.
  12. Daniel Leigh & Stefania Fabrizio & Ashoka Mody, 2009. "The Second Transition," IMF Working Papers 09/43, International Monetary Fund.
  13. Martin Schmitz, 2014. "Financial remoteness and the net external position," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 150(1), pages 191-219, February.

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:spr:weltar:v:145:y:2009:i:3:p:531-550. 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: (Guenther Eichhorn) or (Christopher F Baum).

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.