This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Current Account Balances, Financial Development and Institutions: Assaying the World "Savings Glut"

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Menzie D. Chinn
Hiro Ito

Additional information is available for the following registered author(s):

Abstract

We investigate the medium-term determinants of the current account using a model that controls for factors related to institutional development, with a goal of informing the recent debate over the existence and relevance of the "savings glut." The economic environmental factors that we consider are the degree of financial openness and the extent of legal development. We find that for industrial countries, the government budget balance is an important determinant of the current account balance; the budget balance coefficient is 0.21 in a specification controlling for institutional variables. More interestingly, our empirical findings are not consistent with the argument that the more developed financial markets are, the less saving a country undertakes. We find that this posited relationship is applicable only for countries with highly developed legal systems and open financial markets. For less developed countries and emerging market countries we usually find the reverse correlation; greater financial development leads to higher savings. Furthermore, there is no evidence of "excess domestic saving" in the Asian emerging market countries; rather they seem to have suffered from depressed investment in the wake of the 1997 financial crises. We also find evidence that the more developed equity markets are, the more likely countries are to run current account deficits.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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://www.nber.org/papers/w11761.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

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.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11761.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:nbr:nberwo:11761

Note: IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

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:

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.:
  1. Roger C. Kormendi & Aris Protopapadakis, 2004. "Budget Deficits, Current Account Deficits And Interest Rates: The Systematic Evidence On Ricardian Equivalence," Macroeconomics 0403010, EconWPA. [Downloadable!]
    Other versions:
  2. Joshua Aizenman & Jaewoo Lee, 2005. "International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence," NBER Working Papers 11366, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Menzie D. Chinn & Hiro Ito, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," NBER Working Papers 11370, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. 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.). [Downloadable!]
  5. Shang-Jin Wei, 2000. "Local Corruption and Global Capital Flows," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(2000-2), pages 303-354. [Downloadable!]
  6. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," CEG Working Papers 20012, Trinity College Dublin, Department of Economics. [Downloadable!]
    Other versions:
  7. Sebastian Edwards, 2005. "Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly is Adjustment Likely To Be?," NBER Working Papers 11541, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. William G. Gale & Peter R. Orszag, 2004. "Budget Deficits, National Saving, and Interest Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2004-2), pages 101-210. [Downloadable!]
  9. repec:att:wimass:192054 is not listed on IDEAS
  10. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2005. "Expansionary fiscal shocks and the trade deficit," International Finance Discussion Papers 825, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Michael Graff & Kam-Ki Tang & Jie Zhang, . "Demography, Financial Openness, National Savings and External Balance," MRG Discussion Paper Series 2008, School of Economics, University of Queensland, Australia. [Downloadable!]
    Other versions:
  2. José García-Solanes & Jesús Rodríguez López & José Luis Torres Chacón, 2007. "Demand Shocks and Trade Balance Dynamics," Working Papers 07.10, Universidad Pablo de Olavide, Department of Economics. [Downloadable!]
    Other versions:
  3. Marcel Fratzscher & Luciana Juvenal & Lucio Sarno, 2007. "Asset prices, exchange rates and the current account," Working Paper Series 790, European Central Bank. [Downloadable!]
    Other versions:
  4. Kunieda, Takuma, 2008. "Financial Globalization and Inequality," MPRA Paper 11343, University Library of Munich, Germany. [Downloadable!]
  5. Joseph W. Gruber & Steven B. Kamin, 2008. "Do differences in financial development explain the global pattern of current account imbalances?," International Finance Discussion Papers 923, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  6. Joshua Aizenman & Yothin Jinjarak, 2008. "The US as the "Demander of Last Resort" and its Implications on China's Current Account," NBER Working Papers 14453, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Omar AlShehabi & Shuang Ding, 2008. "Estimating Equilibrium Exchange Rates for Armenia and Georgia," IMF Working Papers 08/110, International Monetary Fund. [Downloadable!]
  8. Ricardo J Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006. "An equilibrum model of "global imbalances" and low interest rates," BIS Working Papers 222, Bank for International Settlements. [Downloadable!]
    Other versions:
  9. Ari Aisen & David Hauner, 2008. "Budget Deficits and Interest Rates: A Fresh Perspective," IMF Working Papers 08/42, International Monetary Fund. [Downloadable!]
  10. Herrmann, Sabine & Winkler, Adalbert, 2008. "Financial markets and the current account: emerging Europe versus emerging Asia," Discussion Paper Series 1: Economic Studies 2008,05, Deutsche Bundesbank, Research Centre. [Downloadable!]
  11. Joshua Aizenman & Yi Sun, 2008. "Globalization and the Sustainability of Large Current Account Imbalances: Size Matters," NBER Working Papers 13734, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Robert A Buckle & Amy A Cruickshank, 2007. "The Challenge of Structural Change in APEC Economies," Treasury Working Paper Series 07/06, New Zealand Treasury. [Downloadable!]
  13. Hideki Nishigaki, 2008. "Are the fiscal and monetary policies of the G-7 countries effective in decreasing the U.S. trade deficit?," Economics Bulletin, Economics Bulletin, vol. 6(27), pages 1-13. [Downloadable!]
  14. Horag Choi & Nelson C. Mark & Donggyu Sul, 2007. "Endogenous Discounting, the World Saving Glut and the U.S. Current Account," NBER Working Papers 13571, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Sebastian Edwards, 2007. "On Current Account Surpluses and the Correction of Global Imbalances," NBER Working Papers 12904, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. 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.). [Downloadable!]
  17. Kevin Cowan & Sebastián Edwards & Rodrigo Valdés, 2007. "Current Account and External Financing: An Introduction," Working Papers Central Bank of Chile 439, Central Bank of Chile. [Downloadable!]
  18. Niko Hobdari, 2008. "Tanzania's Equilibrium Real Exchange Rate," IMF Working Papers 08/138, International Monetary Fund. [Downloadable!]
  19. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2009. "China's Current Account and Exchange Rate," Working Papers 142009, Hong Kong Institute for Monetary Research. [Downloadable!]
    Other versions:
  20. Eva Gutierrez, 2006. "Export Performance and External Competitiveness in the Former Yugoslav Republic of Macedonia," IMF Working Papers 06/261, International Monetary Fund. [Downloadable!]
  21. Hiro Ito & Menzie Chinn, 2007. "East Asia and Global Imbalances: Saving, Investment, and Financial Development," NBER Working Papers 13364, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? You can use convenient plug-ins to search directly IDEAS from your browser.

This page was last updated on 2009-12-8.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.