Current Account Balances and Output Volatility
AbstractIn this paper, we examine the empirical relationship between current account balance and output volatility in a panel data framework using annual data from 185 countries over the period from 1950 to 2010. In our static panel data analysis, we find that a larger current account deficit is associated with higher output volatility, particularly for emerging market economies. Our analysis reveals that this association strongly interacts with GDP per-capita. In order to account for possible endogeneity and feedback effects, we also employ a Panel-VAR framework and show that output volatility gives a significant positive response to a shock in the current account balance and a negative response to the shocks on GDP per-capita capita.
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Bibliographic InfoPaper provided by Bogazici University, Department of Economics in its series Working Papers with number 2013/04.
Date of creation: Apr 2013
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Other versions of this item:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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