This working paper was written by Refet S. Gürkaynak (Bilkent University, CEPR, CESifo and CFS), Sang Seok Lee (Bilkent University and CEPR), Paul Luk (Hong Kong Institute for Monetary and Financial Research) and Ju Hyun Pyun (Korea University Business School).We study the joint behaviour of...

This paper provides an empirical investigation of the medium-term determinants of current accounts for a large sample of industrial and developing countries, utilizing an approach that highlights macroeconomic determinants of longer-term saving and investment balances. Crosssection and panel...

The national-income account identity and the life-cycle theory of consumption together imply that the current account should be a function of the age structure. A country with a high proportion of young and retired should have current account deficits. Using a panel of 84 countries, we find...

This paper shows that countries can use foreign reserves to enhance their domestic economies' resilience to potential risks from balance sheet effects. Based on a theoretical model, this paper demonstrates that the government can either deploy its foreign reserves to lend in foreign currency to...

At a conceptual level, opening of capital markets entails a number of benefits and costs. One major cost of financial openness is output volatility. In this paper, using data from 21 advanced and 81 developing countries during 1971-2010, we empirically examine the impact of capital market...

Most analyses of the East Asian financial crisis have focused on its causes and the links between currency and banking crises. However a related question is what happens in the aftermath of a crisis? What factors determine the path of an economy in the post-devaluation phase? Does it swiftly...

This paper extends the analytical framework provided by Glick and Rogoff (1995. Journal of Monetary Economics 35, 159-192) to an economy with traded and nontraded goods, and it analyzes the impact of country-specific and global productivity shocks on the current account and investment. Each of...

The third generation genre of currency crises models that have been popularized following the recent crises inemerging economies give prominence to the capital account. Hence, they are also commonly referred to as 'capital crisis models'. These models provide the theoretical rationale and...

Why do emerging market economies simultaneously hold very high levels of international reserves and foreign liabilities? Moreover, why, even with such huge amounts of international reserves, did countries barely use them during the Global Financial Crisis? I argue that including international...

To what extent and within what time frame did countries in East Asia recover from the 1997-98 crisis, and, if there has been a recovery, can it be sustained? Drawing on the available evidence, this paper attempts to answer these questions. By implication, however, it also has something to say...