The dynamics among domestic saving, investment, and the current account balance in the USA: a long-run perspective

AbstractExplaining cross-country differences in current accounts is difficult. While pay-as-you-go pensions reduce the need to save for retirement, contributions to capital-funded pensions are saved for future consumption. An overlapping-generations analysis shows that capital-funded pensions increase net foreign assets holdings. With a multi-pillar system whose capital-funded part accounts for 18% of pensions, the Austrian current account balance would be 1 percentage point of gross domestic product (GDP) higher than with pure pay-as-you-go pensions in 20 years. By comparison, the Austrian current account surplus averages 1.8% of GDP. Empirically, I find that the current account of high-income countries increases with the coverage and replacement rates of capital-funded pensions.

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ANALISIS DINAMIS KETERKAITAN VARIABEL YANG MEMPENGARUHI NERACA TRANSAKSI BERJALAN INDONESIA TAHUN 2012

Quantitative Economics Journal ◽

10.24114/qej.v1i2.17408 ◽

2020 ◽

Vol 1 (2) ◽

Author(s):

Winta Ratna Sari

Keyword(s):

Interest Rate ◽

Current Account ◽

Impulse Response Function ◽

Secondary Data ◽

Output Growth ◽

Current Account Balance ◽

Long Run ◽

The Stability ◽

The Current Account

This study was to analyze the contribution rate (the rupiah against the U.S. dollar), Libor Interest Rate, Inflation and Output Growth (GDP) of the current account balance in Indonesia. The data used in this study secondary data is sourced from Indonesia Financial Statistics. The data used is the data quarterly from the first quarter of 2000 up to 2010 fourth quarter. The results of the estimated Vector Autoregression (VAR) indicates that there is a relationship between the Current Account, Exchange Rate, Libor Interest Rate, Inflation and GDP at lag t-1. Impulse response function of the stability of the first note that all variables are in the long run that is over 5 years and tend to be stable. This means that in the short term variables that are used do not provide a meaningful contribution in the long term but will mutually contribute to each other. Variance Decomposition Based on these results, it is known that all variables contributed to the Current Account, but his greatest contribution is of the variable itself, this means that the current account tends to a variable receiving contributions rather than giving contributions

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Analysis of Current Account Deficit Determinants of Balance of Payments in Fixed and Flexible Exchange Rate Regimes: A Comparative Study in CFA Franc and Non-Franc Zones

Journal of Economics and Public Finance ◽

10.22158/jepf.v3n3p447 ◽

2017 ◽

Vol 3 (3) ◽

pp. 447

Author(s):

Remy Hounsou

Keyword(s):

Current Account ◽

Current Account Deficit ◽

Flexible Exchange Rate ◽

Balance Of Payments ◽

Current Account Balance ◽

Domestic Saving ◽

Franc Zone ◽

Financial Variables ◽

The Impact ◽

The Current Account

<p><em>This study compares the impact of certain economic and financial variables on the level of the deficit in the current account of the balance of payments of the countries of the Franc zone and certain countries of the non-Franc zone situated south of the Sahara. The empirical results of the study based on panel data models covering the period 1990-2015 indicate that none of the two zones behaves better against the current account deficit of the balance of payments and that no zone is more competitive than the other. Finally, it was clear from our analysis that the variables of gross domestic, saving and the change in the terms of trade better explain the change in the current account balance in the Franc zone, whereas the variables of net foreign transfers and gross domestic saving impact the most the current account deficit in non-CFA zone.</em></p>

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Current Account Balance in Emerging Asia

Studies in Business and Economics ◽

10.2478/sbe-2021-0002 ◽

2021 ◽

Vol 16 (1) ◽

pp. 12-25

Author(s):

Kivanç Halil Ariç ◽

Siok Kun Sek ◽

Miguel Rocha de Sousa

Keyword(s):

Economic Growth ◽

Interest Rates ◽

Current Account ◽

Causal Effect ◽

Panel Data Analysis ◽

Government Expenditure ◽

Current Account Balance ◽

Important Indicator ◽

Long Run ◽

The Current Account

Abstract The current account balance is an important indicator which reveals information on a country’s economic situation such as investments, capital flows, and indebtedness. The main purpose of this study is to examine the current account balance conditions in emerging Asian countries. In this respect, the long-run and causality relationship between current account balance, economic growth, government expenditure, real interest rates, and foreign direct investment was examined. The panel data analysis was applied using the data dated 1986 to 2015. Our results revealed a causal effect from economic growth and government expenditure to current account balance mainly dependent on saving tendency.

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Does real exchange rate devaluation improve the current account balance of highly indebted low income countries?

African Journal of Economic and Management Studies ◽

10.1108/ajems-11-2017-0287 ◽

2019 ◽

Vol 10 (2) ◽

pp. 212-225

Author(s):

Getaneh Mihret Ayele

Keyword(s):

Time Series ◽

Exchange Rate ◽

Real Exchange Rate ◽

Current Account ◽

Low Income ◽

Low Income Countries ◽

Current Account Balance ◽

Content Type ◽

Long Run ◽

The Current Account

Purpose The purpose of this paper is to examine whether real exchange rate devaluation improves the current account balance of four highly indebted low-income countries of East Africa. Design/methodology/approach The pooled mean group (PMG) approach is used for panel data from four countries over the period 1970–2016. The paper also applied bound testing and ARDL model for time-series data from individual sample countries. Findings The panel PMG/ARDL estimation result reveals that real exchange rate devaluation has no significant impact on the current account balance, both in the short and long run. However, the time-series analysis using the bound testing and restricted ARDL estimation suggests that real exchange rate devaluation improves the current account balance in the long run for only Ethiopia. The overall empirical results reveal that the current account balance would improve with the rising domestic income while it deteriorates with increasing foreign income and external indebtedness in the long run. Originality/value The paper is original.

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Implications of Intertemporal External Budget Deficits in Euroasian Countries

International Conference on Eurasian Economies 2015 ◽

10.36880/c06.01213 ◽

2015 ◽

Author(s):

Sabri Azgün

Keyword(s):

Current Account ◽

Balance Of Payments ◽

Current Account Balance ◽

Budget Deficits ◽

Current Account Deficits ◽

Long Run ◽

Equilibrium Relationship ◽

To Come ◽

Sustainable Economic Growth ◽

The Current Account

Economies should pay attention to the deficits of the balance of payments in order to achieve a sustainable economic growth and development within the process of globalisation. A country having risks in terms of current account deficits can be evaluated as the current economic policy is having problems at present and will have in days to come in the point of sustainability. The sustainability of the current account deficits are defined by the intertemporal budget constraint. According to the budget constraints, the path of outlays to the external world with revenues obtained from abroad determines intertemporal solvency contidion. If there is no long-run equilibrium relationship between these two variables, intertemporal budget constaint will not be provided. The aim of this study is to determine whether it satisfies the intertemporal solvency condition of Euorasian economies for the period 2005Q1-2014Q4. In this study, by analyzing intertemporal externel budget consratint by unit root and cointegration methods, it is examined that carries potantieal risk in terms of the current account balance of Euroasian economies.

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The Sources of Indonesia’s Current Account Balance Fluctuations: An Empirical Test of the Vector Error Correction Model (VECM)

Journal of Emerging Economies and Islamic Research ◽

10.24191/jeeir.v2i1.9134 ◽

2014 ◽

Vol 2 (1) ◽

pp. 16

Author(s):

Tri Winarno

Keyword(s):

Exchange Rate ◽

Current Account ◽

Trade Balance ◽

Real Effective Exchange Rate ◽

Current Account Balance ◽

Long Run ◽

Effective Exchange ◽

Effective Exchange Rate ◽

Exchange Rate Depreciation ◽

The Current Account

Identifying the sources of current account balance fluctuations is critical to formulating Indonesia’s macroeconomic policies which maintain both internal and external balance to guarantee sustainable economic development as mandated by The Central Bank of Indonesia Act. This study is an attempt to investigate the long-run relationship between the current account balance (including total trade balance and non-oil and gas trade balance), world exports, domestic income (a proxy by industrial production index), and real effective exchange rate in the case of Indonesia’s economy. Based on the traditional approach of elasticity (Marshall Lerner condition) and by applying the VECM method to monthly data for the period January of 2008 up to December 2012, the investigation to examine the existence of a long-run equilibrium relationship between the current account balance and its sources is conducted. Additionally, variance decompositions (VDCs) and impulse response functions (IRFs) are used to draw further inferences. The result of the VECM method indicates that there is a stable long-run relationship between the current account balance and real effective exchange rate, domestic income and world exports variables. The estimated results show that real effective exchange rate depreciation is positively related to the current account balance in the long run, consistent with the Marshall Lerner condition. This study also finds evidence of the J-curve on Indonesia's current account balance. This suggests that following a real effective exchange rate depreciation, the Indonesia current account balance will initially deteriorate but improve in the long-run. Thus the exchange rate policy can help improve the current account balance. Furthermore, the results provide strong evidence that world exports and domestic income play a strong role in determining the behavior of the current account balance.

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What Explains Current Account Surplus in Korea?

Asian Economic Papers ◽

10.1162/asep_a_00610 ◽

2018 ◽

Vol 17 (2) ◽

pp. 70-93

Author(s):

Chirok Han ◽

Kwanho Shin

Keyword(s):

Exchange Rate ◽

Fiscal Policy ◽

Current Account ◽

Current Account Balance ◽

Budget Deficits ◽

Current Account Surplus ◽

Short Run ◽

The Right ◽

The Impact ◽

The Current Account

Since the currency crisis in 1998, Korea has experienced continuous current account surpluses. Recently, the current account surplus increased more rapidly—amounting to 7.7 percent of GDP in 2015. In this paper, we investigate the underlying reasons for the widening of Korea's current account surpluses. We find that the upward trend in Korea's current account surpluses is largely explained by its demographical changes. Other economic variables are only helpful when explaining short run fluctuations in current account balances. Moreover, we show that Korea's current account surplus is expected to disappear by 2042 as it becomes one of the most aged economies in the world. Demographic changes are so powerful that they explain, quite successfully, the current account balance trends of other economies with highly aged populations such as Japan, Germany, Italy, Finland, and Greece. When we add the real exchange rate as an additional explanatory variable, it is statistically significant with the right sign, but the magnitude explained by it is quite limited. For example, to reduce the current account surplus by 1 percentage point, a 12 percent depreciation is needed. If Korea's current exchange rate is undervalued 4 to 12 percent less than the level consistent with fundamentals, it is impossible to reduce Korea's current account surplus to a reasonable level by adjusting the exchange rate alone. Another way to reduce current account surplus is to expand fiscal policies. We find, however, that the impact of fiscal adjustments in reducing current account surplus is even more limited. According to our estimates, reducing the current account surplus by 1 percentage point requires an increase in budget deficits (as a ratio to GDP) of 5 to 6 percentage points. If we allow endogenous movements of exchange rate and fiscal policy, the impact of exchange rate adjustment increases by 1.6 times but that of fiscal policy decreases that it is no longer statistically significant.

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The Harberger-Laursen-Metzler Effect: Evidence from Pakistan

THE LAHORE JOURNAL OF ECONOMICS ◽

10.35536/lje.2012.v17.i2.a4 ◽

2012 ◽

Vol 17 (2) ◽

pp. 87-110 ◽

Cited By ~ 2

Author(s):

Tayyaba Idrees ◽

Saira Tufail

Keyword(s):

Time Series ◽

Current Account ◽

Vector Autoregression ◽

Real Income ◽

Terms Of Trade ◽

Temporary Increase ◽

Current Account Balance ◽

Time Series Dataset ◽

The Current Account

According to the Harberger-Laursen-Metzler (HLM) effect, an exogenous temporary increase in the terms of trade leads to an improvement in the current account balance. This paper uses a recursive vector autoregression to investigate empirically the existence of the HLM effect in Pakistan, using a time series dataset for the period 1980–2009. Two important results emerge. First, real income deteriorates with an improvement in the terms of trade. Second, the current account balance also responds negatively to innovations in the terms of trade, which implies that the HLM effect does not exist in Pakistan.

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Financial Liberalization and Current Account Developments in New EU Member States

Zagreb International Review of Economics and Business ◽

10.2478/zireb-2020-0009 ◽

2020 ◽

Vol 23 (1) ◽

pp. 141-154

Author(s):

Zdenka Obuljen Zoričić ◽

Boris Cota ◽

Nataša Erjavec

Keyword(s):

Exchange Rate ◽

Current Account ◽

Positive Sign ◽

Current Account Balance ◽

Financial Openness ◽

Member States ◽

Eu Member States ◽

New Eu Member States ◽

The Eu ◽

The Current Account

AbstractDue to negotiations on accession to the EU, the new EU member states from Central and Eastern Europe went through the financial opening. In the pre-crisis period followed by high liquidity in global markets, most of the EU new member states experienced rapid credit growth, which conditioned the appreciation of the exchange rate. External imbalances and vulnerabilities built up. Countries experienced deterioration in their current accounts. This paper investigates the link between financial openness, real effective exchange rate, financial crisis and current account balance within the Panel Auto-Regressive Distributed Lag (ARDL) framework for 11 new European Union members during the period from 1999 to 2016. The results obtained by the use of pooled mean group estimator (PMG) show that in the long run, financial openness has a significant negative impact on the current account balance. In the short run, crisis significantly influences the current account balance having a positive sign.

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