What Determines the Current Account? a Cross-Sectional and Panel Approach
June 1, 1996
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Summary
This paper uses cross-section and panel data to examine the determinants of the current account. The empirics find a significant impact of the stage of development and demographic factors in the cross section. Estimating partial-adjustment and error-correction models using panel data, the paper finds a short- and long-run impact of fiscal policy on the current account in the time series. The real exchange rate, the business cycle and the terms of trade are also shown to have short-run effects on the current account, while the stage of development and demographics have longer-run effects.
Subject: Balance of payments, Current account, Current account deficits, External position, Foreign assets, International trade, Public debt, Terms of trade
Keywords: Current account, Current account deficits, current account determination, current account discrepancy, current account position, current account transaction, dependency ratio, dependent variable, flow current account, Foreign assets, GDP, GDP ratio, Global, long-run current account surplus, open economy, output ratio, ratio, Terms of trade, WP
Pages:
42
Volume:
1996
DOI:
Issue:
058
Series:
Working Paper No. 1996/058
Stock No:
WPIEA0581996
ISBN:
9781451966701
ISSN:
1018-5941
