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Intertemporal Sustainability Of Current Account Imbalances
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Book Synopsis Intertemporal Sustainability of Current Account Imbalances by : Tarlok Singh
Download or read book Intertemporal Sustainability of Current Account Imbalances written by Tarlok Singh and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study estimates the intertemporal model for the relationship between exports and imports and examines the sustainability of current account deficits (CADs) and the validity of intertemporal budget constraint for 24 Organisation for Economic Co-operation and Development countries. The standard ordinary least squares (OLS)-based two-step Engle and Granger test, the cointegration regression Durbin-Watson (CRDW) test, and the Stock-Watson test performed on the one-regime model with time-invariant parameters and no structural break provide mixed support for the presence of cointegration between exports and imports. The recursive least squares-based cumulative sum of recursive residuals (CUSUM) and the cumulative sum of squares of recursive residuals (CUSUMSQ) tests and the OLS-based Andrews-Quandt (AQ) and Andrews - Ploberger (AP) tests suggest the presence of structural breaks in the long-run relationship between exports and imports for a number of countries. The end-of-sample new cointegration breakdown tests performed on the OLS, fully modified OLS, and full-information maximum-likelihood estimates of the model suggest the presence of cointegration between exports and imports for most countries. The dominant support for cointegration between trade flows points toward the sustainability of CADs and the validity of intertemporal budget constraint. The macroeconomic stabilization policies seem to have been effective in correcting the market failures and maintaining the steady-state equilibrium relationship between trade flows in the sample countries. The findings of this study have important implications for empirical research. The structural breaks in the cointegrating vector could occur even over the short time periods and at any point in time. It is essentially important to assess the sustainability of the external position in the presence of long-period as well as short-period breaks in the cointegrating vector.
Author :Gian Maria Milesi-Ferretti Publisher :International Finance Section Princeton University Internati ISBN 13 : Total Pages :90 pages Book Rating :4.3/5 (129 download)
Book Synopsis Current-account Sustainability by : Gian Maria Milesi-Ferretti
Download or read book Current-account Sustainability written by Gian Maria Milesi-Ferretti and published by International Finance Section Princeton University Internati. This book was released on 1996 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study presents a notion of current-account sustainability that explicitly considers, in addition to intertemporal solvency, a willingness to pay and to lend. It argues that this notion of sustainability provides a useful framework for understanding the variety of country experiences with protracted current-account imbalances. Based on this notion, the authors identify a number of potential sustainability indicators related to the structure of the economy and the economic policy stance. They use these indicators in the evaluation of the experience of a number of countries that have run persistent current-account imbalances and ask whether they help to discriminate between countries that underwent an external crisis and those that did not.
Book Synopsis Assessing External Sustainability in India by : Mr.Tim Callen
Download or read book Assessing External Sustainability in India written by Mr.Tim Callen and published by International Monetary Fund. This book was released on 1999-12-01 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the solvency and sustainability of India’s external imbalances and analyzes the optimality of its capital flows. We use three approaches: an intertemporal model of the current account that allows for capital controls; a composite model of macroeconomic indicators that yields probabilities of future balance of payments crises; and scenarios that examine the path of the current account consistent with the stabilization of India’s external liability-to-GDP ratio. The results indicate that India’s intertemporal budget constraint is satisfied and that the path of its current account imbalances is sustainable, with some support for the optimality (given capital controls) of its external borrowing.
Book Synopsis Sustainability of External Imbalances by : Angelique Herzberg
Download or read book Sustainability of External Imbalances written by Angelique Herzberg and published by . This book was released on 2015 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Sustainability of Current Account Deficit in Turkey by : Özcan Karahan
Download or read book Sustainability of Current Account Deficit in Turkey written by Özcan Karahan and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose: This study aims to examine the sustainability of the current account deficit in Turkey for the quarterly data between 2003 and 2018. Besides, some policy implications are made to ensure the sustainability of the current account deficit in Turkey's economy. Design/methodology/approach: The dynamics related to the sustainability of the current account deficit is analysed within the framework of the "intertemporal budget constraint approach" developed by Husted (1992). The long-term dynamics are empirically investigated using the Johansen cointegration test. Econometric analysis is also expanded within the framework of the Vector Error Model to reveal the short-term dynamics. Findings: The results of Johansen cointegration analysis suggest that current account income and expenses are integrated with the cointegrating coefficient less than 1, implying that Turkey has a weak form of current account deficit sustainability. Findings of the Vector Error Correction model confirm the results of long-run analysis and indicates that the deviations from the long-term equilibrium are corrected at a rate of 78% every quarter term. Research limitations/implications: The "intertemporal budget constraint approach" developed by Husted (1992) focuses on the equilibrium between current account income and expenses to analyse the sustainability of the foreign balance. However, the sustainability of the foreign deficit is also closely related to what kind of capital inflows is used to finance the foreign deficit. Therefore, the implications made regarding the sustainability of the current account deficit in Turkey based on the Husted model should be accepted with some reservations. Originality/value: Since external imbalances are a key challenge for most of the developing countries to provide full integration into the world economy, many empirical studies are examining the current account sustainability. The majority of these studies focus on the long-run dynamics of the current account imbalances. Unlike most of the previous studies, this paper also focuses on the short-run dynamics of the current account balance. Thus, the difference of this study from other studies stems from the examination of the dynamics of current account sustainability not only in the long term but also in the short term.
Book Synopsis Sustainability of Persistent Current Account Deficits by : Gian Maria Milesi-Ferretti
Download or read book Sustainability of Persistent Current Account Deficits written by Gian Maria Milesi-Ferretti and published by . This book was released on 1996 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper puts forward a notion of current account sustainability that explicitly takes into account willingness to pay and willingness to lend in addition to intertemporal solvency. It argues that this notion of sustainability provides a better framework for understanding the variety of country experiences with protracted current account imbalances. Based on this notion, we identify a number of operational indicators related to the structure of the economy, the economic policy stance, and political economy factors. We use these sustainability indicators to evaluate the experience of a number of countries that ran persistent current account imbalances, and derive policy implications consistent with our notion of sustainability.
Author :Gian Maria Milesi-Ferretti Publisher :International Finance Section Princeton University Internati ISBN 13 : Total Pages :90 pages Book Rating :4.3/5 (129 download)
Book Synopsis Current-account Sustainability by : Gian Maria Milesi-Ferretti
Download or read book Current-account Sustainability written by Gian Maria Milesi-Ferretti and published by International Finance Section Princeton University Internati. This book was released on 1996 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study presents a notion of current-account sustainability that explicitly considers, in addition to intertemporal solvency, a willingness to pay and to lend. It argues that this notion of sustainability provides a useful framework for understanding the variety of country experiences with protracted current-account imbalances. Based on this notion, the authors identify a number of potential sustainability indicators related to the structure of the economy and the economic policy stance. They use these indicators in the evaluation of the experience of a number of countries that have run persistent current-account imbalances and ask whether they help to discriminate between countries that underwent an external crisis and those that did not.
Book Synopsis Current Account Imbalances by : Willi Semmler
Download or read book Current Account Imbalances written by Willi Semmler and published by . This book was released on 2015 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this paper is to analyze the external debt of three euro area economies, Italy, Spain, and Germany. To study the effect of debt on the investment-consumption dynamics in those countries, we first discuss the causes, sources, and adjustment processes of current account deficits in industrialized economies, with a particular focus on the Eurozone member states. We then introduce new empirical measures of sustainability. Instead of using the common measure of external debt over GDP, we use debt over assets. To study the dynamics of external debt sustainability we use an intertemporal model of finite time horizon, which we numerically solve through the method of Non-linear Model Predictive Control (NMPC) method. Using our numerical solution method, we provide a calibration of the external debt sustainability for Italy, Spain, and Germany. In the calibration of our model for those countries we also measure sustainability by the debt to asset ratio and show that the periphery economies moved toward a slow moving debt crisis, whereas Germany moved into a stable environment. Yet, the latter is likely to be affected by the former in the long run.
Book Synopsis Sharp Reductions in Current Account Deficits by : Mr.Gian Milesi-Ferretti
Download or read book Sharp Reductions in Current Account Deficits written by Mr.Gian Milesi-Ferretti and published by International Monetary Fund. This book was released on 1997-12-01 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper studies determinants and consequences of sharp reductions in current account imbalances (reversals) in low- and middle-income countries. It poses two questions: what triggers reversals, and what factors explain how costly reversals are? It finds that both domestic variables, such as the current account balance, openness to trade, and the level of reserves, and external variables, such as terms of trade shocks, U.S. real interest rates, and growth in industrial countries, seem to play important roles in explaining reversals in current account imbalances. It also finds some evidence that countries with a less appreciated real exchange rate, higher investment, and more openness before the reversal tend to grow faster after a reversal occurs.
Book Synopsis Sustainability of India's Current Account Deficit by : Aneesha Chitgupi
Download or read book Sustainability of India's Current Account Deficit written by Aneesha Chitgupi and published by . This book was released on 2019 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Preventing Currency Crises in Emerging Markets by : Sebastian Edwards
Download or read book Preventing Currency Crises in Emerging Markets written by Sebastian Edwards and published by University of Chicago Press. This book was released on 2002-11-15 with total page 782 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economists and policymakers are still trying to understand the lessons recent financial crises in Asia and other emerging market countries hold for the future of the global financial system. In this timely and important volume, distinguished academics, officials in multilateral organizations, and public and private sector economists explore the causes of and effective policy responses to international currency crises. Topics covered include exchange rate regimes, contagion (transmission of currency crises across countries), the current account of the balance of payments, the role of private sector investors and of speculators, the reaction of the official sector (including the multilaterals), capital controls, bank supervision and weaknesses, and the roles of cronyism, corruption, and large players (including hedge funds). Ably balancing detailed case studies, cross-country comparisons, and theoretical concerns, this book will make a major contribution to ongoing efforts to understand and prevent international currency crises.
Book Synopsis Trade, Investment and Economic Growth by : Pooja Lakhanpal
Download or read book Trade, Investment and Economic Growth written by Pooja Lakhanpal and published by Springer Nature. This book was released on 2021-05-10 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book contributes to the growing literature pertaining to empirical and policy issues in international trade, foreign capital flows and issues in finance, implications for India and emerging economies related to trade and development interface, and analysis of sector level growth and development in India. Further, the focus is on the policy aspects of these themes and their role in fostering economic development in the context of India and other emerging market economies. The discourse focuses mainly on empirical work and econometric details. The relevant issues are investigated using state of the art techniques such as gravity models, panel co-integration, generalized hyperbolic distributions, SEM, FMOLS and Probit models. In addition, detailed literature survey, discussions on data availability, issues related to statistical estimation techniques and a theoretical background, ensure that each chapter significantly contributes to the ever-growing literature on international trade and capital flows. The readers shall find an engaging dialogue on the crucial role played by policy and the trade-capital flows-growth experience of emerging economies. The book is relevant for those who are interested in contemporary issues in trade, growth and finance as well as for students of advanced econometrics who may benefit from the analytical and econometric exposition. The empirical evidences provided here could serve as ready reference for academicians, researchers and policy makers, particularly in emerging economies facing similar challenges.
Book Synopsis G7 Current Account Imbalances by : Richard H. Clarida
Download or read book G7 Current Account Imbalances written by Richard H. Clarida and published by University of Chicago Press. This book was released on 2007-11-01 with total page 518 pages. Available in PDF, EPUB and Kindle. Book excerpt: The current account deficit of the United States is more than six percent of its gross domestic product—an all-time high. And the rest of the world, including other G7 countries such as Japan and Germany, must collectively run current account surpluses to finance this deficit. How long can such unevenness between imports and exports be sustained, and what form might their eventual reconciliation take? Putting forth scenarios ranging from a gradual correction to a crash landing for the dollar, G7 Current Account Imbalances brings together economists from around the globe to consider the origins, status, and future of those disparities. An esteemed group of collaborators here examines the role of the bursting of the dot-com bubble, the history of previous episodes of current account adjustments, and the possibility of the Euro surpassing the dollar as the leading international reserve currency. Though there are areas of broad agreement—that the imbalances will ultimately decline and that currency revaluations will be part of the solution—many areas of contention remain regarding both the dangers of imbalances and the possible forms of adjustment. This volume will be of tremendous value to economists, politicians, and business leaders alike as they look to the future of the G7 economies.
Book Synopsis The External Balance Assessment (EBA) Methodology by : Mr.Steven Phillips
Download or read book The External Balance Assessment (EBA) Methodology written by Mr.Steven Phillips and published by International Monetary Fund. This book was released on 2014-01-13 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: The External Balance Assessment (EBA) methodology has been developed by the IMF’s Research Department as a successor to the CGER methodology for assessing current accounts and exchange rates in a multilaterally consistent manner. Compared to other approaches, EBA emphasizes distinguishing between the positive empirical analysis and the normative assessment of current accounts and exchange rates, and highlights the roles of policies and policy distortions. This paper provides a comprehensive description and discussion of the 2013 version (“2.0”) of the EBA methodology, including areas for its further development.
Book Synopsis The Cost of Future Policy: Intertemporal Public Sector Balance Sheets in the G7 by : Yugo Koshima
Download or read book The Cost of Future Policy: Intertemporal Public Sector Balance Sheets in the G7 written by Yugo Koshima and published by International Monetary Fund. This book was released on 2021-05-06 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper compiles the Intertemporal Public Sector Balance Sheets for all G7 countries and examines their relationship with government borrowing costs. In 2018, all G7 countries have negative Intertemporal Net Financial Worth (INFW), falling short of their intertemporal budget constraint. A decomposition of the evolution of INFW shows that short-term fluctuations are mainly driven by fiscal policy changes, while in the long run demographic changes and health and pension obligations play a larger role. We find that on average a 10 percentage point of GDP increase in INFW reduces the (future) 10-1 year sovereign yield curve spread by 2.8 basis points. This results suggest that financial markets pay attention to governments’ future policy obligations, in addition to its current assets and liabilities.
Book Synopsis External Adjustment by : Maurice Obstfeld
Download or read book External Adjustment written by Maurice Obstfeld and published by . This book was released on 2004 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Gross stocks of foreign assets have increased rapidly relative to national outputs since 1990, and the short-run capital gains and losses on those assets can amount to significant fractions of GDP. These fluctuations in asset values render the national income and product account measure of the current account balance increasingly inadequate as a summary of the change in a country's net foreign assets. Nonetheless, unusually large current account imbalances, especially deficits, should remain high on policymakers' list of concerns, even for the richer and less credit-constrained countries. Extreme imbalances signal the need for large and perhaps abrupt real exchange rate changes in the future, changes that might have undesired political and financial consequences given the incompleteness of domestic and international asset markets. Furthermore, of the two sources of the change in net foreign assets -- the current account and the capital gain on the net foreign asset position -- the former is better understood and more amenable to policy influence. Systematic government attempts to manipulate international asset values in order to change the net foreign asset position could have a destabilizing effect on market expectations"--NBER website
Book Synopsis Global Waves of Debt by : M. Ayhan Kose
Download or read book Global Waves of Debt written by M. Ayhan Kose and published by World Bank Publications. This book was released on 2021-03-03 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
