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Determinants of current account imbalances in the global economy: A dynamic panel analysis

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  • Das, Debasish Kumar

Abstract

This research presents an empirical investigation of the determinants of current account imbalance for the large sample of developed, emerging and developing countries during 1980-2011. Using dynamic panel GMM techniques, this study characterizes that current account balance are positively correlated with net foreign assets, trade openness and exchange rate stability and negatively associated with commodity price, real GDP growth and real effective exchange rate for the developed countries. While, among emerging countries, commodity price, real GDP growth, trade openness and de-jure capital openness is positively and net foreign asset, exchange rate stability index is negatively related with current account balance. These findings suggest that the current account determinants explain different characteristics in terms of different country groups. The results also hold Chinn and Ito (2007) and Chinn and Prasad (2003) along with three more important determinants with significant influence on current account, which have not ever considered in literature.

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  • Das, Debasish Kumar, 2012. "Determinants of current account imbalances in the global economy: A dynamic panel analysis," MPRA Paper 42419, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42419
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    Keywords

    Current account Determinants; Global imbalance; Dynamic Panel GMM;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F30 - International Economics - - International Finance - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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