On Cyclicality in the Current and Financial Accounts: Evidence from Nine Industrial Countries

 
Author/Editor: Clausen, Jens R. ; Kandil, Magda E.
 
Publication Date: March 01, 2005
 
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Summary: The paper investigates cyclical fluctuations in the current and financial (formerly capital) accounts of the balance of payments and major underlying components for nine industrial countries. The empirical model uses as explanatory variables domestic output growth, price inflation, real exchange rate fluctuations, energy price inflation, global growth, and regional growth. The evidence from the estimation of the model indicates the importance of fluctuations in output growth to the cyclicality of the current and financial account balances. The necessary and sufficient condition to sustain a large current account deficit is high domestic growth, which tends to stimulate financial inflows and provides adequate resources for financing. Other factors appear to be less important to the cyclicality of the current and financial account balances and their negative correlations.
 
Series: Working Paper No. 05/56
Subject(s): Current account | Australia | Canada | Denmark | France | Germany | Italy | New Zealand | Sweden | United Kingdom | Capital account | Production | Economic models

Author's Keyword(s): Current account | financial account | cointegration | reduced form equations
 
English
Publication Date: March 01, 2005
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2005056 Pages: 39
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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