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Accounting for the Current Account Behavior in ASEAN-5

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Author Info
Lau, Evan
Baharumshah, Ahmad Zubaidi
Habibullah, Muzafar Shah

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Abstract

Current account are an endogenous variable that contain information about the behavior of the economics agents and is important for economic policymaking as it gives a broad reflection of the stance of macroeconomics policies. The imbalances in current account are a reflection of the forward-looking, dynamic saving and investment decisions in the intertemporal approach to current account modeling. This study empirically analyzed the anatomy of the dynamic current account behavior for the ASEAN-5 countries using present value model. Despite the simplicity, the statistical computations suggest that the agents behave as the forward-looking rational agents in the face of the shocks in the three out of five economies. This implies that the current account acts as a buffer to smooth the consumption in the presence of shock and optimally smoothing its consumption path for these countries.

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File URL: http://mpra.ub.uni-muenchen.de/1322/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1322.

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Date of creation: 03 Jan 2007
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Handle: RePEc:pra:mprapa:1322

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Related research
Keywords: Current Account; Present Value Model; Consumption Smoothing; Consumption Tilting.;

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Find related papers by JEL classification:
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity

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  1. Allan W. Gregory & Bruce E. Hansen, 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
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  2. Sheffrin, Steven M. & Woo, Wing Thye, 1990. "Present value tests of an intertemporal model of the current account," Journal of International Economics, Elsevier, vol. 29(3-4), pages 237-253, November. [Downloadable!] (restricted)
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  3. Gian Maria Milesi-Ferretti & Assaf Razin, 1996. "Current Account Sustainability - Selected East Asian and Latin American Experiences," IMF Working Papers 96/110, International Monetary Fund.
    Other versions:
  4. Milbourne, Ross & Otto, Glenn, 1992. "Consumption Smoothing and the Current Account," Australian Economic Papers, Blackwell Publishing, vol. 31(59), pages 369-84, December.
  5. Ghosh, Atish R & Ostry, Jonathan D, 1995. "The Current Account in Developing Countries: A Perspective from the Consumption-Smoothing Approach," World Bank Economic Review, Oxford University Press, vol. 9(2), pages 305-33, May.
  6. Stelios Makrydakis, 1999. "Consumption-smoothing and the excessiveness of Greece's current account deficits," Empirical Economics, Springer, vol. 24(2), pages 183-209. [Downloadable!] (restricted)
  7. Jonathan David Ostry, 1997. "Current Account Imbalances in ASEAN Countries - Are they a Problem?," IMF Working Papers 97/51, International Monetary Fund.
  8. Sheffrin, Steven M. & Woo, Wing Thye, 1990. "Testing an optimizing model of the current account via the consumption function," Journal of International Money and Finance, Elsevier, vol. 9(2), pages 220-233, June. [Downloadable!] (restricted)
  9. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October. [Downloadable!] (restricted)
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  10. Kunhong Kim & Viv B Hall & Robert A Buckle, 2001. "New Zealand's Current Account Deficit: Analysis based on the Intertemporal Optimisation Approach," Treasury Working Paper Series 01/02, New Zealand Treasury. [Downloadable!]
  11. Sachs, Jeffrey, 1982. " The Current Account in the Macroeconomic Adjustment Process," Scandinavian Journal of Economics, Blackwell Publishing, vol. 84(2), pages 147-59.
  12. 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.
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  13. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  14. Assaf Razin, 1995. "The Dynamic-Optimizing Approach to the Current Account: Theory and Evidence," NBER Working Papers 4334, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Cashin, Paul & McDermott, C John, 1998. "Are Australia's Current Account Deficits Excessive?," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 346-61, December.
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  16. Glenn Otto, 2003. "Can an Intertemporal Model Explain Australia's Current Account Deficit?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(3), pages 350-359. [Downloadable!] (restricted)
  17. Karfakis, Costas, 1996. "Testing the Intertemporal Model of the Current Account: Some Evidence from Greece," Applied Economics Letters, Taylor and Francis Journals, vol. 3(12), pages 759-62, December. [Downloadable!] (restricted)
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