Dynamics of Current Account Deficit: A Lesson from Pakistan
This study investigates the determinants of current account deficit in Pakistan by using the annual time series data for the period 1976 to 2010. The cointegration results suggest the positive and significant long run relationship of current account deficit with exchange rate, trade deficit and fiscal deficit, while significant negative relationship is found with external debt and private saving. The error correction model also confirms the significant positive relationship of current account deficit with exchange rate, trade deficit and fiscal deficit in short run. The Granger-causality test shows the bidirectional causality run from exchange rate and external debt to current account deficit. However, unidirectional causality is found from current account deficit to external debt and fiscal deficit. It is recommended that government needs to be cautious in financing its fiscal deficit. Savings habits should be increase to narrow the investment gap in economy.
|Date of creation:||10 Feb 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Hanan Morsy, 2009.
"Current Account Determinants for Oil-Exporting Countries,"
IMF Working Papers
09/28, International Monetary Fund.
- Hanan Morsy, 2010. "Current Account Determinants For Oil-Exporting Countries," Working Papers 511, Economic Research Forum, revised Mar 2010.
- Calderon, Cesar & Chong, Alberto & Loayza, Norman, 2000.
"Determinants of current account deficits in developing countries,"
Policy Research Working Paper Series
2398, The World Bank.
- Calderon Cesar Augusto & Chong Alberto & Loayza Norman V., 2002. "Determinants of Current Account Deficits in Developing Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-33, March.
- César Calderón & Alberto Chong & Norman Loayza, 1999. "Determinants of Current Account Deficits in Developing Countries," Working Papers Central Bank of Chile 51, Central Bank of Chile.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Menzie D. Chinn & Eswar S. Prasad, 2000.
"Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration,"
NBER Working Papers
7581, National Bureau of Economic Research, Inc.
- Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
- Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries; An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
- Kwalingana, Samson & Nkuna, Onelie, 2009. "The Determinants of Current Account Imbalances in Malawi," MPRA Paper 14694, University Library of Munich, Germany.
- Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? a Cross-Sectional and Panel Approach," IMF Working Papers 96/58, International Monetary Fund.
- Ahmad Zubaidi Baharumshah & Evan Lau, 2007. "Dynamics of fiscal and current account deficits in Thailand: an empirical investigation," Journal of Economic Studies, Emerald Group Publishing, vol. 34(6), pages 454-475, November.
- Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38999. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.