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Determinants and dynamics of current account reversals: an empirical analysis

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Author Info
Liesenfeld, Roman
Moura, Guilherme V.
Richard, Jean-François
Abstract

We 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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Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2009,04.

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Date of creation: 2009
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Handle: RePEc:zbw:cauewp:200904

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Web page: http://www.wiso.uni-kiel.de/econ/

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Related research
Keywords: Panel data; dynamic discrete choice; importance sampling; Monte Carlo integration; state dependence; spillover effects;

Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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This page was last updated on 2009-11-30.

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