Determinants and dynamics of current account reversals: an empirical analysis
AbstractWe use panel probit models with unobserved heterogeneity, state-dependence and serially correlated errors in order to analyze the determinants and the dynamics of current-account reversals for a panel of developing and emerging countries. The likelihood-based inference of these models requires high-dimensional integration for which we use Efficient Importance Sampling (EIS). Our results suggest that current account balance, terms of trades, foreign reserves and concessional debt are important determinants of current-account reversal. Furthermore, we find strong evidence for serial dependence in the occurrence of reversals. While the likelihood criterion suggest that state-dependence and serially correlated errors are essentially observationally equivalent, measures of predictive performance provide support for the hypothesis that the serial dependence is mainly due to serially correlated country-specific shocks related to local political or macroeconomic events. --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2009,04.
Date of creation: 2009
Date of revision:
Panel data; dynamic discrete choice; importance sampling; Monte Carlo integration; state dependence; spillover effects;
Other versions of this item:
- Roman Liesenfeld & Guilherme Valle Moura & Jean-François Richard, 2010. "Determinants and Dynamics of Current Account Reversals: An Empirical Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(4), pages 486-517, 08.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-19 (All new papers)
- NEP-DCM-2009-09-19 (Discrete Choice Models)
- NEP-OPM-2009-09-19 (Open Economy Macroeconomic)
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