We use panel probit models with unobserved heterogeneity, state-dependence and serially correlated errors in order to analyze the determinants and the dynamics of current-account reversals for a panel of developing and emerging countries. The likelihood-based inference of these models requires...

In this paper, I argue that international policy coordination requires to include both monetary as well as fiscal policy because both sides include policy instruments that allow the strategic manipulation of the country's terms of trade. Hence, the coordination of one part of national...

The global financial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any firm conclusion. We explore three alternative...

This paper estimates fundamental equilibrium exchange rate of RMB based on internal and external balance of China’s economy. The findings indicate that RMB real exchange rate is overvalued in the period of 1982–1991, but the extent of the undervaluation has an enlarging trend since 2004....

Limited empirical work has been done to the diverging current account balances of the individual emerging Asian economies. Based on the intertemporal approach to current account, this paper empirically examines both the long-run and short-run impacts of initial stock of net foreign assets,...

Theoretically, financial account (FA) serves as a means of financing deficit in a country’s current account (CA). With the outburst of the rapid globalization and the liberalization of the capital markets, the function of FA could be a major cause of CA instability. This study empirically...

In recent years China has experienced two forms of extreme macroeconomic imbalance: an expenditure imbalance in the sense of very high investment and very low consumption, giving rise to rapid capital accumulation; and an imbalance between expenditure and production, producing external...

This paper investigates the large current account deficits observed in most new EU member states using an intertemporal model. The standard model is extended to include: (1) the persistence of current account positions and (2) the relevance of the fiscal balance. Specifically, a closed form...

We investigate the relationship between terms-of-trade shocks and the current account of a small open economy in the presence of imperfect competition and nominal price rigidities in the nontraded sector. We show that a temporary termsof- trade improvement results in a current account surplus...