This study uses two alternative specifications to test the interdependence between the current and capital accounts of the balance of payments. The empirical specifications, derived from the balance of payments constraint and from national income accounting relationships, respectively, yield consistent support for the interdependence hypothesis. The balance of payments specification returns positive findings for nine of the ten sample countries. These are corroborated by the general equilibrium specification in three instances. Neglect of the comprehensive lag structure of the underlying model may account for the relatively weak support from the general equilibrium specification of the interdependence hypothesis.
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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number
04/08.
Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
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