ASIAN CURRENT ACCOUNT BALANCES AND SPILLOVERS FROM A FOREIGN COUNTRY, A REGION AND THE UNITED STATES
Abstract
This paper provides an overall picture on the influence of domestic and foreign shocks on the current account of selected Asian countries over the period 1978 to 2012. The present value model of the current account theory states that forward looking and consumption smoothing behaviour of economic agents can promote sustainable current account balances, as long as these are maintained by transitory unanticipated shocks to the current account. The unexpected transitory domestic and foreign shocks are sourced, respectively, from the domestic and foreign current account. Foreign shocks are developed from an Asian country, a region, and the US. Our empirical analysis of the impact of foreign and domestic current account shocks shows that unexpected domestic shocks, rather than unexpected foreign shocks, matter for the current accounts of Asian countries.
Downloads
References
Ahmed, S., and Park, J. H. (1994). Sources of Macroeconomic Fluctuations in Small Open Economies. Journal of Macroeconomics, 16, 1-36.
Bergin, P. R., and Sheffrin, S. M. (2000). Interest Rates, Exchange Rates and Resent Value Models of the Current Account. Economic Journal, 110, 535-558.
Campbell, J. Y., (1987). Does saving anticipate declining labor income? An alternative test of the permanent income hypothesis, Econometrica 55, 1249-1274.
Cashin, P., and McDermott C. J. (2002). Terms of Trade Shocks and the Current Account: Evidence from Five Industrial Countries. Open Economies Review 13, 219-235.
Corden, W. M. (2009). China’s Exchange Rate Policy, Its Current Account Surplus and the Global Imbalances, The Economic Journal, 119, 430-441.
Chinn, M. D., and Ito, H. (2007a). Current Account Balances, Financial Development, and Institutions: Assaying the “World Saving Glut”, Journal of International Money and Finance, 26, 546-569.
Chinn, M. D., and Ito, H. (2007b). East Asia and Global Imbalances: Saving, Investment and Financial Development, NBER Working paper, 13364.
Chinn, M. D., and Prasad, E. S. (2003). Medium-term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration. Journal of International Economics, 59, 47-76.
Dibooglu, S. (1997). Accounting for US Current Account Deficits: An Empirical Investigation. Applied Economics. 29, 787-93.
Edward, S. (1989). Temporary Terms of Trade Disturbances, the Real Exchange Rate and the Current Account. Economica 56, 343-357.
Engler, P., Fidora, M., and Thiman, C., (2009). External Imbalances and the US Current Account. How Supply-Side Changes Affect an Exchange Rate Adjustment, Review of International Economics, 17, 927-941.
Ghosh, A. R., (1995). International capital mobility amongst the major industrialised countries: too little or too much? Economic Journal, 105, 107-128.
Glick, R., and Rogoff, K. (1995). Global versus Country-Specific Productivity Shocks and the Current Account. Journal of Monetary Economics, 35, 159-192.
Greenwood, J. 1983. Expectations, the Exchange Rate and the Current Account. Journal of Monetary Economics, 12, 543-569.
Gregory, A. W., and Head, A. C. (1999). Common and Country-Specific Fluctuations in Productivity, Investment and the Current Account. Journal of Monetary Economics, 44, 423-451.
Gruber, J. W., and Kamin, S. B. (2007). Explaining the Global Pattern of Current Account Imbalances, Journal of International Money and Finance, 26, 500-522.
Gruber, J. W. and Kamin, S. (2009). Do Differences in Financial Development Explain The Global Pattern of Current Account Imbalances? Review of International Economics, 17, 667-688.
Hoffman, M. (2013). What Drives China’s Current Account? Journal of International Money and Finance, 32, 856-883.
Hossain, F. (1999). Transitory and Permanent Disturbances and the Current Account: An Empirical Analysis in the Intertemporal Framework. Applied Economics, 31, 965-974.
Hubbard, G. (2006). The US Current Account Deficit and Public Policy, Journal of Policy Modeling, 28, 665-71.
Iscan, T. B. (2000) The Terms of Trade, Productivity Growth and the Current Account, Journal of Monetary Economics, 45, 587-612.
Kaufmann, S., Scharler, J., and Winckler, G. (2002). The Austrian Current Account Deficit: Driven by Twin Deficits or by Intertemporal Expenditure Allocation? Empirical Economics 27. 529-542.
Kent, C., and Cashin, P. (2003). The Response of the Current Account to Terms of Trade Shocks: Persistence Matters. IMF Working Paper, WP/03/143.
Kim, B-H., Min, H-G., Hwang, Y-S., and McDonald, J. A. (2009). Are Asian Countries Current Accounts Sustainable? Deficits, Even When Associated with High Investment, Are Not Costless, Journal of Policy Modelling, 31, 163-179.
Longin, F., and Solnik, B. (1995). Is the Correlation in International Equity Returns Constant: 1960-1990?, Journal of international Money and Finance, 10, 231-251.
Mendoza, E. G., Vincenzo, Q., and Ros-Rull, J.-V. (2007) Financial Integration, Financial Deepness and Global Imbalances, NBER Working Paper 12909.
Narayan, S. (2009). A Survey on Dynamics of Current Account Imbalances. The Indian Economic Journal, 57, 3-26.
Narayan, S., (2014). Integration of the Current Account Imbalances in the OECD, Economic Modelling, 38, 288-295.
Narayan, S., Sriananthakumar, S., and Islam, S. (2014). Stock Market Integration of Emerging Asian Economies: Patterns and Causes. Economic Modelling, 39, 19-31
Narayan, S. and Rehman, M. (2017). Diversification Opportunities between Emerging and Frontier Asian (EFA) and Developed Stock Markets, Finance Research Letters, 23, 223-232.
Narayan, S and Rehman, M. (2018). Portfolio Diversification Opportunities within Emerging and Frontier Stock Markets: Evidence From Ten Asian Countries, Bulletin of Monetary Economics and Banking, 21, 1-21.
Narayan, S and Rehman, M., (2019). International Portfolio Strategies and Opportunities: The Case of the US, Japan and Asia, Finance Research Letters, In Press. https://doi.org/10.1016/j.frl.2019.101358.
Narayan, S., Ngoc, M-H., (2019). Does Corruption in Exporter and Importer Country Influence International Trade? Emerging Markets Finance and Trade. DOI: 10.1080/1540496X.2019.1679116
Narayan, S. (2019). The Influence of Domestic and Foreign Shocks on Portfolio Diversification Gains and the Associated Risks. Journal of Risk Financial Management, 12, 160.
Narayan, S., and Nguyen, T.T. (2019). Are Exports More Responsive to Clean or Dirty Energy? The Case of Vietnam’s Exports to 54 Countries. Energies, 12, 1558.
Nason, J. M. and Rogers, J. H. (2002). Investment and the Current Account in the Short Run and The Long Run, Journal of Money, Credit, and Banking, 34, 967-986.
Obstfeld, M., and Rogoff, K. (1996). Foundations of International Macroeconomics. MIT Press, Cambridge.
Obstfeld, M., and Rogoff, K. (2000). Perspectives on OECD Capital Market Integration: Implications for U.S. Current Account Adjustment. In Federal Reserve Bank of Kansas City, Global Economic Integration: Opportunities and Challenges, 169–208. Kansas City, MO: Federal Reserve Bank of Kansas City.
Obstfeld, M., Rogoff, K. (2006). The Unsustainable US Current Account Position Revisited, in Richard Clarida (ed.), G7 Current Account Imbalances: Sustainability and Adjustment, Chicago: University of Chicago Press.
Ogawa, E., and Iwatsubo, K. (2009). External Adjustments and Coordinated Exchange Rate Policy in Asia, Journal of Asian Economics, 20, 225-239.
Otto, G. (1992). Testing a present-value model of the current account: Evidence from US and Canadian times series, Journal of International Money and Finance, 11, 414-430.
Rogoff, K., (2007). Global imbalances and exchange rate adjustment, Journal of Policy Modeling, 29(5), September-October 705-709.
Sheffrin, S. M and Woo, T. W. (1990). Present Value of An Intertemporal Model of the Current Account. Journal of International Economics, 29, 237-253.
Wӓlti, S. (2011). Stock Market Synchronization and Monetary Integration, Journal of International Money and Finance, 30, 96-110.
Yang, D. T., (2012). Aggregate Savings and External Imbalances in China, Journal of Economic Perspective, 26, 125-146.
Copyright (c) 2020 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
