A country's intertemporal budget constraint implies current account stationarity or that its saving and investment rates should cointegrate. However, such behaviour may not pertain in finite sample spans where the current account could be subject to persistent shocks. Accordingly, this paper...

This paper investigates the relative importance of hot money in bank credit and portfolio flows from the US to 18 emerging markets over the period 1988-2012. We deploy state-space models à la Kalman filter to identify the unobserved hot money as the temporary component of each type of flow. The...