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Current-Account Reversals in Developing Countries: The Role of Fundamentals

  • Alberto Bagnai


  • Stefano Manzocchi


This paper studies episodes of current-account reversal in developing countries (DCs) in the period 1965–1994. First, a number of persistent shifts (“reversalsâ€) in the current-account balance dynamics are identified by structural break and segmented trend tests; then, the relationship between these reversals and a set of fundamentals suggested by the intertemporal approach to the current account is investigated in a panel-data set-up. We find that fundamentals play a different role in episodes of persistent deterioration or improvement of the current-account balance in DCs. Copyright Kluwer Academic Publishers 1999

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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 10 (1999)
Issue (Month): 2 (May)
Pages: 143-163

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Handle: RePEc:kap:openec:v:10:y:1999:i:2:p:143-163
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  1. Milesi-Ferretti, G.M. & Razin, A., 1997. "Origins of Sharp Reductions in Current Account deficits: An Empirical Analysis," Papers 25-97, Tel Aviv.
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