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Current Accounts in the Long Run and the Intertemporal Approach: A Panel Data Investigation

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  • Mario Cerrato
  • Huseyin Kalyoncu
  • Naveed Hassan Naqvi
  • Christopher Tsoukis

Abstract

type="main" xml:id="twec12152-abs-0001"> This paper is a theory-based study of the long-run determinants of the current account (CA). For many OECD economies after the Second World War, there has been more long-run variation in the CA data than is emphasised by a ‘Permanent Income’ version of the intertemporal approach that is based on consumption-smoothing and that allows only transitory CA imbalances. A theoretical model of the CA is developed, based on the ‘broader’ variant of the intertemporal approach that stresses the long-term component of the CA. We find that some key theoretical predictions hold, while others fail, validating the approach but also pointing to its limitations.

Suggested Citation

  • Mario Cerrato & Huseyin Kalyoncu & Naveed Hassan Naqvi & Christopher Tsoukis, 2015. "Current Accounts in the Long Run and the Intertemporal Approach: A Panel Data Investigation," The World Economy, Wiley Blackwell, vol. 38(2), pages 340-359, February.
  • Handle: RePEc:bla:worlde:v:38:y:2015:i:2:p:340-359
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    File URL: http://hdl.handle.net/10.1111/twec.2015.38.issue-2
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    Citations

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    Cited by:

    1. Ghassan, Hassan B. & Al-Jefri, Essam H., 2015. "الحساب الجاري في المدى البعيد عبر نموذج داخلي الزمن
      [The Current Account in the Long Run through the Intertemporal Model]
      ," MPRA Paper 66527, University Library of Munich, Germany.
    2. Ghassan, Hassan B. & Al-Jefri, Essam H., 2016. "الحساب الجاري للاقتصاد السعودي عبر نموذج داخلي الزمن دلائل من منهجية نموذج التقهقر الذاتي البنيوي
      [The Current Account of Saudi Economy through Intertemporal Model: Evidence from SVAR]
      ," MPRA Paper 80302, University Library of Munich, Germany, revised Jun 2017.
    3. Ghassan, Hassan B. & Al-Jefri, Essam H., 2015. "نموذج نظري إسلامي داخلي الزمن للحساب الجاري
      [Islamic Theoretical Intertemporal Model of the Current Account]
      ," MPRA Paper 69963, University Library of Munich, Germany, revised 11 Jan 2016.
    4. Ghassan, Hassan B. & Drissi, Ramzi, 2015. "Long Run Current Account through theoretical Intertemporal Model," MPRA Paper 71997, University Library of Munich, Germany, revised 04 Apr 2015.
    5. Stefan Schiman & Andreas Reinstaller, 2015. "Analyse der Terms-of-Trade Österreichs," WIFO Studies, WIFO, number 60648.
    6. Matthieu Bussiere & Aikaterini Karadimitropoulou & Miguel A. Leon-Ledesma, 2017. "Current account dynamics and the real exchange rate: Disentangling the evidence," University of East Anglia School of Economics Working Paper Series 2017-06, School of Economics, University of East Anglia, Norwich, UK..

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