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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.

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.
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  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. 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)
  9. 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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  10. 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)
  11. 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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  12. 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!]
  13. Sachs, Jeffrey, 1982. " The Current Account in the Macroeconomic Adjustment Process," Scandinavian Journal of Economics, Blackwell Publishing, vol. 84(2), pages 147-59.
  14. 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)
  15. 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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