What Determines the Current Account? a Cross-Sectional and Panel Approach

June 1, 1996

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

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:
https://doi.org/10.5089/9781451966701.001
Issue:
058
Series:
Working Paper No. 1996/058
Stock No:
WPIEA0581996
ISBN:
9781451966701
ISSN:
1018-5941

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