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Global Imbalances and the Global Saving Glut – A Panel Data Assessment

Author Info

  • Anthony Legg

    (Reserve Bank of Australia)

  • Nalini Prasad

    (Reserve Bank of Australia)

  • Tim Robinson

    (Reserve Bank of Australia)

Abstract

Since the late 1990s there have been substantial changes in the current account balances of a number of economies, most notably a marked widening in the current account deficit of the United States and increased net lending by many developing nations to developed economies. This paper uses panel data to examine what may have contributed to changes in the current account positions of a wide sample of developing and developed economies. In particular, we aim to assess the ‘global saving glut’ hypothesis that financial crises have contributed to the current account surpluses in developing economies. Overall, we find some support for this argument; there is a significant role for financial crises as well as institutional factors in determining current account balances. However, the model captures the broad trends evident in international capital flows for only some of the major regions in our sample.

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Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2007-11.

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Date of creation: Nov 2007
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Handle: RePEc:rba:rbardp:rdp2007-11
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Keywords: current accounts; financial crises; capital flows;

Find related papers by 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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  1. Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
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  6. 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.
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  10. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2004. "The US Current Account Deficit and Economic Development: Collateral for a Total Return Swap," NBER Working Papers 10727, National Bureau of Economic Research, Inc.
  11. Paul Bergin & Steven Sheffrin, . "Interest Rates, Exchange Rates And Present Value Models Of The Current Account," Department of Economics 97-22, California Davis - Department of Economics.
  12. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
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  14. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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  16. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x.
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Cited by:

  1. Kam Ki Tang & Michael Graff & Jie Zhang, . "Macroeconomic Fluctuations in Emerging Economies: An Unobserved Components Approach," MRG Discussion Paper Series 4111, School of Economics, University of Queensland, Australia.
  2. Gossé, Jean-Baptiste & Serranito, Francisco, 2014. "Long-run determinants of current accounts in OECD countries: Lessons for intra-European imbalances," Economic Modelling, Elsevier, vol. 38(C), pages 451-462.
  3. Giancarlo Bertocco, 2011. "Global Saving Glut and housing bubble: a critical analysis," Economics and Quantitative Methods qf1112, Department of Economics, University of Insubria.
  4. Michael Graff & Kam Ki Tang & Jie Zhang, 2008. "Demography, Financial Openness, National Savings and External Balance," KOF Working papers 08-194, KOF Swiss Economic Institute, ETH Zurich.

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