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

March 1, 2005

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Format: Chicago

Jens R Clausen, and Magda E. Kandil On Cyclicality in the Current and Financial Accounts: Evidence from Nine Industrial Countries, (USA: International Monetary Fund, 2005) accessed November 8, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Current account, Current account balance, Current account deficits, Financial account, Inflation

Keywords: Deficit, Trading partner, Value, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/056
Stock No:

WPIEA2005056
ISBN:

9781451860757
ISSN:

1018-5941

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