Determinants of Current Account Deficits in Developing Countries
The authors examine the empirical links between current account deficits and a broad set of economic variables proposed in the literature. To accomplish this, they complement and extend previous research by using a large, consistent set of macroeco...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/07/443639/determinants-current-account-deficits-developing-countries http://hdl.handle.net/10986/19825 |
| Summary: | The authors examine the empirical links
between current account deficits and a broad set of economic
variables proposed in the literature. To accomplish this,
they complement and extend previous research by using a
large, consistent set of macroeconomic data on public and
private domestic savings, external savings, and national
income variables; focusing on developing economies by
drawing on a panel data set for 44 developing countries and
annual information for the period 1966-95; adopting a
reduced-form approach rather than holding to a particular
structural model; distinguishing between within-country and
cross-country effects; and employing a class of estimators
that controls for the problems of simultaneity and reverse
causation. Among their findings: Current account deficits in
developing countries are moderately persistent. A rise in
domestic output growth generates a larger current account
deficit. Increases in savings rates have a positive effect
on the current account. Shocks that increase the terms of
trade or cause the real exchange rate to appreciate are
linked with higher current account deficits. Either higher
growth rates in industrial economies or higher international
interest rates reduce the current account deficit in
developing economies. |
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