Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration

By M. Chinn, Eswar S. Prasad. Social Science Research Network, 2000

971 citations recorded by the source corpus.

This paper provides an empirical investigation of the medium-term determinants of current accounts for a large sample of industrial and developing countries. The analysis is based on a structural approach that highlights the roles of the fundamental macroeconomic determinants of saving and investment. Cross-section and panel regression techniques are used to characterize the properties of current account variation across countries and over time. Current account balances are positively correlated with government budget balances and initial stocks of net foreign assets. Among developing countries, measures of financial deepening are positively correlated while indicators of openness to international trade are negatively correlated with current account balances.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/27c5b6638324515a384fcaf1385b9abe14b10298

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Citations in the corpus

Patterns of international capital flows and their implications for economic development (2006, background): “…and investment, as well as exchange rate overvaluation, all of which will be important in what follows.8 There is a well-developed theory of the life cycle model applied to countries that has implications for the evolution of current account balances (see the discussion in Chinn and Prasad, 2003).”
The External Balance Assessment (EBA) Methodology (2013, background): “6 This literature includes the work on the CGER predecessor to EBA (Lee et al. (2008)), and for example, Blanchard (2007), Chinn and Prasad (2003), Chinn, Eichengreen, and Ito (2007, 2011), Debelle and Faruqee (1996), de Santis, Finicelli, and Veronese (2011), Gruber and Kamin (2007, 2008), and…”
Current Account Imbalances and Real Exchange Rates in the Euro Area (2006, background): “2 For examp le, see Masson (1998), Chinn and Prasad (2000), IMF (2005).”
Current Account Balances, Financial Development and Institutions: Assaying the World "Savings Glut" (2007, positive): “We confirm the results obtained by Chinn and Prasad (2003) that – for the industrialized countries – budget balances play an important role in the determination of current account balances.”
Twin deficits: squaring theory, evidence and common sense (2006, positive): “Nonetheless, some studies have succeeded in establishing the notion that about a third of the increase in the budget deficit is reflected in the trade deficit, e.g. Chinn and Prasad (2003).”
External Liabilities and Crises (2013, positive): “The approach hinges on the inter-temporal Saving–Investment model starting with Obstfeld and Rogoff (1996), empirically implemented and extended in several subsequent contributions (see, e.g., Chinn and Prasad, 2003; Chinn et al, 2014).”
A Forensic Analysis of Global Imbalances (2011, methodology): “Chinn and Ito (2007, 2008) use a sample of developed and developing countries over the period 1971 to 2004 and control for a similar set of variables as used in Chinn and Prasad (2003).”
Foreign Capital and Economic Growth (2007, neutral): “…FDI flows-GDP ratio 10.374 (12.223) Ratio of gross private inflows (FDI + portfolio + debt) to GDP 12.688 (10.007) Capital account policy opennessd -0.098 (0.203) No. of observations 55 56 56 55 R2 0.66 0.67 0.68 0.65 Source: Authors’ regressions using same source data as for tables 1, 2, and 4. a.”
Current account imbalances and financial integration in the euro area (2011, positive): “10 We also find that average EU GDP per capita has a neg tive effect on the trade balance, which is consistent with what one would expect from theory (e.g., Chinn and Prasad, 2003).”
Current account determinants and external sustainability in periods of structural change (2011, neutral): “1 See Debelle and Faruqee (1996), Faruqee and Debelle (1998) and Chinn and Prasad (2003). A less developed country has a larger deficit, as the marked need for investment is accompanied by relatively low domestic saving.”
Global Current Account Imbalances: American Fiscal Policy versus East Asian Savings (2008, methodology): “10 The data are updated to 2004 and cover more countries (163 countries) than what can be found in Chinn and Ito (2006). The updated data are available at http://www.”
International Finance and Income Convergence: Europe is Different (2007, methodology): “5 Testing for such an interaction is apparently novel; while Chinn and Prasad (2003) include measure of capital controls in their current account specification, they do not interact these with the level of income.”