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Interaction Between Capital Flows And Current Account: A Dynamic Panel Causality Analysis Of 19 Emerging Market Economies For The Period 1980 To 2009

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  • A.Yasemin YALTA
  • Bahar BAYRAKTAR-SAGLAM

Abstract

We empirically examine the causal relation between current account and different types of foreign capital flows applying a dynamic panel causality approach, which enables us to deal with the endogeneity between foreign capital flows and current account. Our analysis based on 19 emerging market economies indicates that foreign direct investment and portfolio flows Granger-cause current account. This finding raises questions regarding the sustainability of current account deficits in emerging market economies, which rely on foreign capital inflows for financing the deficit.

Suggested Citation

  • A.Yasemin YALTA & Bahar BAYRAKTAR-SAGLAM, 2016. "Interaction Between Capital Flows And Current Account: A Dynamic Panel Causality Analysis Of 19 Emerging Market Economies For The Period 1980 To 2009," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 16(2), pages 25-32.
    • Handle: RePEc:eaa:aeinde:v:16:y:2016:i:2_2
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    Cited by:

    1. Özcan Karahan & Olcay Çolak, 2020. "An Examination Of The Causality Relationship Between Current And Financial Accounts In Turkey," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 7-28, January –.

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    More about this item

    Keywords

    current account; capital flows; panel causality; dynamic panel.;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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