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Determinants of current account imbalances in the global economy: A dynamic panel analysis

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  • Das, Debasish Kumar

Abstract

This research presents an empirical investigation of the determinants of current account imbalance for the large sample of developed, emerging and developing countries during 1980-2011. Using dynamic panel GMM techniques, this study characterizes that current account balance are positively correlated with net foreign assets, trade openness and exchange rate stability and negatively associated with commodity price, real GDP growth and real effective exchange rate for the developed countries. While, among emerging countries, commodity price, real GDP growth, trade openness and de-jure capital openness is positively and net foreign asset, exchange rate stability index is negatively related with current account balance. These findings suggest that the current account determinants explain different characteristics in terms of different country groups. The results also hold Chinn and Ito (2007) and Chinn and Prasad (2003) along with three more important determinants with significant influence on current account, which have not ever considered in literature.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42419.

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Date of creation: 30 Sep 2012
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Handle: RePEc:pra:mprapa:42419

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Keywords: Current account Determinants; Global imbalance; Dynamic Panel GMM;

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