Current Account Deficits, Macroeconomic Policy Stance and Governance: An Empirical Investigation
Abstract
This paper empirically investigates the effects of institutional and macroeconomic policy stance variables on current account deficits (CAD). Based on cross-section data for a broad number of developing and industrial countries, the results strongly suggest that better governance increases whilst the presence of original sin decreases the ability of an economy to sustain CAD. Exchange rate flexibility and openness appear to put a discipline on CAD. Consistent with the equity home bias and Feldstein-Horioka puzzle, CAD decrease with country size. The net impacts of the financial deepening and monetary credibility on CAD are found to be insignificant.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.Bibliographic Info
Paper provided by ERC - Economic Research Center, Middle East Technical University in its series ERC Working Papers with number 0414.Length: 11 pages
Date of creation: Oct 2004
Date of revision: Oct 2004
Handle: RePEc:met:wpaper:0414
Contact details of provider:
Postal: Ankara 06531
Phone: +90 (312) 210 2003
Fax: (312) 210 1244
Email:
Web page: http://www.erc.metu.edu.tr
More information through EDIRC
Related research
Keywords: Current Account; Exchange Rate Regimes; Original Sin;Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
- NEP-IFN-2004-11-22 (International Finance)
- NEP-MAC-2004-11-22 (Macroeconomics)
References
References listed on IDEASPlease 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.:
- Obstfeld, Maurice, 2004.
"Globalization, Macroeconomic Performance, and the Exchange Rates of Emerging Economies,"
Center for International and Development Economics Research, Working Paper Series
qt7q670769, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Maurice Obstfeld, 2004. "Globalization, Macroeconomic Performance, and the Exchange Rates of Emerging Economies," NBER Working Papers 10849, National Bureau of Economic Research, Inc.
- Hausmann, Ricardo & Panizza, Ugo, 2003. "On the determinants of Original Sin: an empirical investigation," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 957-990, December.
- Chinn, Menzie D. & Prasad, Eswar S., 2003.
"Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration,"
Journal of International Economics,
Elsevier, vol. 59(1), pages 47-76, January.
- 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.
- Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries - An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
- P Martin & H Rey, 2000.
"Financial Super-Markets: Size Matters for Asset Trade,"
CEP Discussion Papers
dp0450, Centre for Economic Performance, LSE.
- Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, vol. 64(2), pages 335-361, December.
- Philippe Martin & H=E9l=E8ne Rey=, 2001. "Financial Super-Markets: Size Matters for Asset Trade," International Finance 0012001, EconWPA.
- Martin, Philippe & Rey, Hélène, 1999. "Financial Super-Markets: Size Matters for Asset Trade," CEPR Discussion Papers 2232, C.E.P.R. Discussion Papers.
- Martin, Philippe & Rey, Hélène, 2000. "Financial Super-Markets: Size Matters for Asset Trade," Center for International and Development Economics Research, Working Paper Series qt0dr2z6p9, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Philippe Martin & Helene Rey, 2001. "Financial Super-Markets: Size Matters for Asset Trade," NBER Working Papers 8476, National Bureau of Economic Research, Inc.
- Philippe Martin and H�l�ne Rey., 2000. "Financial Super-Markets: Size Matters for Asset Trade," Center for International and Development Economics Research (CIDER) Working Papers C00-110, University of California at Berkeley.
- Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000.
"A new database on financial development and structure,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-3125518, Tilburg University.
- Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
- Maurice Obstfeld & Kenneth Rogoff, 1996.
"The Intertemporal Approach to the Current Account,"
NBER Working Papers
4893, National Bureau of Economic Research, Inc.
- Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799 Elsevier.
- 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.
- César Calderón & Alberto Chong & Norman Loayza, 1999.
"Determinants of Current Account Deficits in Developing Countries,"
Working Papers Central Bank of Chile
51, Central Bank of Chile.
- Cesar Augusto Calderon & Alberto Chong & Norman V. Loayza, 2002. "Determinants of Current Account Deficits in Developing Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 0(1), pages 2.
- Calderon, Cesar & Chong, Alberto & Loayza, Norman, 2000. "Determinants of current account deficits in developing countries," Policy Research Working Paper Series 2398, The World Bank.
- Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
- Alejandro Izquierdo & Ernesto Talvi & Guillermo A. Calvo, 2002.
"Sudden Stops, the Real Exchange Rate and Fiscal Sustainability: Argentina's Lessons,"
Research Department Publications
4299, Inter-American Development Bank, Research Department.
- Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2003. "Sudden Stops, the Real Exchange Rate, and Fiscal Sustainability: Argentina's Lessons," NBER Working Papers 9828, National Bureau of Economic Research, Inc.
- Milesi-Ferretti, G-M & Razin, A, 1996. "Current-Account Sustainability," Princeton Studies in International Economics 81, International Economics Section, Departement of Economics Princeton University,.
- repec:rus:hseeco:181565 is not listed on IDEAS
- Ahearne, Alan G. & Griever, William L. & Warnock, Francis E., 2004.
"Information costs and home bias: an analysis of US holdings of foreign equities,"
Journal of International Economics,
Elsevier, vol. 62(2), pages 313-336, March.
- Alan G. Ahearne & William L. Griever & Francis E. Warnock, 2000. "Information costs and home bias: an analysis of U.S. holdings of foreign equities," International Finance Discussion Papers 691, Board of Governors of the Federal Reserve System (U.S.).
- Feldstein, Martin & Horioka, Charles, 1980.
"Domestic Saving and International Capital Flows,"
Economic Journal,
Royal Economic Society, vol. 90(358), pages 314-29, June.
- Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Rogoff, Kenneth, 2004.
"The modern history of exchange rate arrangements: A reinterpretation,"
MPRA Paper
14070, University Library of Munich, Germany.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
- Nason, James M. & Rogers, John H., 2006.
"The present-value model of the current account has been rejected: Round up the usual suspects,"
Journal of International Economics,
Elsevier, vol. 68(1), pages 159-187, January.
- James M. Nason & John H. Rogers, 2003. "The present-value model of the current account has been rejected: Round up the usual suspects," Working Paper 2003-7, Federal Reserve Bank of Atlanta.
- James M. Nason & John H. Rogers, 2003. "The present-value model of the current account has been rejected: round up the usual suspects," International Finance Discussion Papers 760, Board of Governors of the Federal Reserve System (U.S.).
- James M. Nason and John H. Rogers, 2001. "The Present Value Model of the Current Account Has Been Rejected: Round Up the Usual Subjects," Computing in Economics and Finance 2001 102, Society for Computational Economics.
- Alan M. Taylor, 2002.
"A Century of Current Account Dynamics,"
NBER Working Papers
8927, National Bureau of Economic Research, Inc.
- Taylor, Alan M., 2002. "A century of current account dynamics," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 725-748, November.
- 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.
- Jerry Coakley & Ana-Maria Fuertes & Fabio Spagnolo, 2004. "Is the Feldstein-Horioka Puzzle History?," Manchester School, University of Manchester, vol. 72(5), pages 569-590, 09.
Citations
Lists
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.Statistics
Access and download statisticsCorrections
When requesting a correction, please mention this item's handle: RePEc:met:wpaper:0414For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Erol Taymaz).
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.

