Determinants and Dynamics of Current Account Reversals: An Empirical Analysis
We use panel probit models with unobserved heterogeneity, state dependence and serially correlated errors in order to analyse 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. 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. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2010.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 72 (2010)
Issue (Month): 4 (08)
|Contact details of provider:|| Postal: Manor Rd. Building, Oxford, OX1 3UQ|
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0305-9049
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0305-9049|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004.
"On the empirics of Sudden Stops: the relevance of balance-sheet effects,"
Federal Reserve Bank of San Francisco, issue Jun.
- Guillermo A. Calvo & Alejandro Izquierdo & Luis Fernando Mejía, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," Research Department Publications 4367, Inter-American Development Bank, Research Department.
- Guillermo A. Calvo & Alejandro Izquierdo & Luis Fernando Mejía, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," IDB Publications (Working Papers) 6516, Inter-American Development Bank.
- Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejia, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," NBER Working Papers 10520, National Bureau of Economic Research, Inc.
- Keane, Michael, 1993. "Simulation estimation for panel data models with limited dependent variables," MPRA Paper 53029, University Library of Munich, Germany.
- Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
- Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
- Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January.
- Himarios, Daniel, 1989. "Do Devaluations Improve the Trade Balance? The Evidence Revisited," Economic Inquiry, Western Economic Association International, vol. 27(1), pages 143-168, January.
- Geweke, John & Keane, Michael, 2001. "Computationally intensive methods for integration in econometrics," Handbook of Econometrics,in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 56, pages 3463-3568 Elsevier.
- Sebastian Edwards, 2004. "Financial Openness, Sudden Stops, and Current-Account Reversals," American Economic Review, American Economic Association, vol. 94(2), pages 59-64, May.
- Sebastian Edwards, 2004. "Financial Openness, Sudden Stops and Current Account Reversals," NBER Working Papers 10277, National Bureau of Economic Research, Inc.
- Elisabetta Falcetti & Merxe Tudela, 2006. "Modelling Currency Crises in Emerging Markets: A Dynamic Probit Model with Unobserved Heterogeneity and Autocorrelated Errors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(4), pages 445-471, 08.
- Geweke, John F. & Keane, Michael P. & Runkle, David E., 1997. "Statistical inference in the multinomial multiperiod probit model," Journal of Econometrics, Elsevier, vol. 80(1), pages 125-165, September.
- John F. Geweke & Michael P. Keane & David E. Runkle, 1994. "Statistical inference in the multinomial multiperiod probit model," Staff Report 177, Federal Reserve Bank of Minneapolis.
- Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals, and Sudden Stops," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 1-49, June.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini & Cedric Tille, 1999. "Competitive devaluations: a welfare-based approach," Staff Reports 58, Federal Reserve Bank of New York.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini & Cedric Tille, 1999. "Competitive Devaluations: A Welfare-Based Approach," NBER Working Papers 6889, National Bureau of Economic Research, Inc.
- Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
- Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
- Richard, Jean-Francois & Zhang, Wei, 2007. "Efficient high-dimensional importance sampling," Journal of Econometrics, Elsevier, vol. 141(2), pages 1385-1411, December.
- Dornbusch, Rudiger & Park, Yung Chul & Claessens, Stijn, 2000. "Contagion: Understanding How It Spreads," World Bank Research Observer, World Bank Group, vol. 15(2), pages 177-197, August.
- Edwards, Sebastian & Rigobon, Roberto, 2002. "Currency crises and contagion: an introduction," Journal of Development Economics, Elsevier, vol. 69(2), pages 307-313, December.
- repec:pit:wpaper:321 is not listed on IDEAS Full references (including those not matched with items on IDEAS)