IMF Stabilization Programs, Policy Conduct and Macroeconomic Outcomes: A Case Study of Pakistan

2006 ◽  
Vol 11 (1) ◽  
pp. 35-62
Author(s):  
Nawaz A. Hakro ◽  
Wadho Waqar Ahmed
Keyword(s):  
Current Account ◽  
Inflation Rate ◽  
Current Account Balance ◽  
Macroeconomic Policies ◽  
Explanatory Variables ◽  
Fiscal Balance ◽  
Macroeconomic Impacts ◽  
The Individual ◽  
The Imf

This study is designed to assess the macroeconomic performance of fund-supported programs, and the sequencing and ordering of macroeconomic policies in the context of the Pakistan economy. The generalized evaluation estimator technique has been used to assess the macroeconomic impacts of the IMF supported programs. GDP growth, inflation rate, current account balance, fiscal balance and unemployment are used as the target variables in order to gauge economic performance during the program years. The vector of policy variables (that might have been adopted in the absence of programs) and the vector of foreign exogenous variables are also taken as explanatory variables in the model, so that the individual effect of the IMF supported programs could be assessed. The result suggests that as the IMF prescriptions were applied, the current account balance has worsened, the unemployment rate has significantly increased, and the inflation rate has increased during the years of fund-supported programs. Only the budget balance has shown signs of improvement. Furthermore an inadequate sequencing of reforms has contributed to the further worsening of the economic scenario during the program period.

scholarly journals Current account imbalances in the euro area

2013 ◽  
Vol 61 (7) ◽  
pp. 2631-2638
Author(s):  
Klára Plecitá ◽  
Ladislava Grochová ◽  
Luboš Střelec
Keyword(s):  
The Netherlands ◽  
Current Account ◽  
Euro Area ◽  
International Investment ◽  
Current Account Balance ◽  
Net Income ◽  
Explanatory Variables ◽  
Economic Fundamentals ◽  
Current Account Deficits ◽  
Fiscal Balance

While the current account balance for the euro area as a whole has been in balance, divergences in current account positions among the euro-area members have widened since the introduction of the common currency euro. During the last 13 years Portugal, Greece and Spain have run large and persistent current account deficits, whereas Luxembourg, the Netherlands, Finland or Germany have displayed during the same period large and persistent surpluses. However, there is no unambiguous agreement among economists, whether this divergence of current account positions of the euro-area countries mirrors growing intra-euro-area imbalances (Gros, 2012) or just reflects proper functioning of the European integration process (Schmitz and von Hagen, 2009). Therefore, the aim of this paper is to estimate equilibrium current account position for each of the original 12 euro area countries so that it is possible to assess whether the divergence of intra-euro current account balances could be explained on the basis of economic fundamentals or it just reflects misallocation of resources and thus macroeconomic imbalances. The equilibrium current account balance is estimated using a panel-econometric technique for a sample of 30 industrial countries, which represent euro-area member states and their main business partners, over the period 1993–2011. Economic fundamentals affecting the equilibrium current account position are selected on the basis of the saving-investment balance, the trade balance and the net income balance, to ensure that we take into an account all theoretically important explanatory variables. We find that the main determinants of current account norms in our sample are fiscal balance, a country’s net international investment position, oil balance and a country’s stage of economic development. The major part of the euro-area countries exhibits current account positions close to their equilibrium levels with the exception of the Netherlands and Finland which have persistently higher surpluses, while Portugal and Greece run larger current account deficits than is their norm.

scholarly journals The Role of Macroeconomic Stability in Current Account Balances

2021 ◽  
Author(s):  
Murat Cetrez ◽  
Yasin Baris Altayligil
Keyword(s):  
Developing Countries ◽  
Current Account ◽  
Inflation Rate ◽  
African Countries ◽  
Significant Relationships ◽  
Fiscal Balance ◽  
First Time ◽  
Current Account Balances ◽  
Macroeconomic Stability

Abstract The role of macroeconomic stability in current account balances has not been studied with a calculated index in the literature until now. It is aimed to find out the role of macroeconomic stability in current account balances for the first time in the study. The analysis is completed for the period between 1980 and 2016 for 97 countries. The macroeconomic stability is represented by an index which is created with inflation rate, growth rate, unemployment rate and fiscal balance data of all the countries. It is found out that the macroeconomic stability is one of the important determinants of current account balances like institutional quality and financial development. It has a negative and statistically significant relationships with current account balances for four different country groups which are developing countries, all countries except industrial, all countries except industrial and African countries, and all countries. Results show that the macroeconomic stability is especially important for the developing countries rather than high income countries.

scholarly journals Determinants of Current Account Balance in Six ASEAN Countries: A Panel Analysis Approach

2019 ◽  
Vol 11 (7) ◽  
pp. 129
Author(s):  
Soo Xin Lin ◽  
Jerome Kueh
Keyword(s):  
Current Account ◽  
Panel Cointegration ◽  
Current Account Balance ◽  
Vector Error Correction ◽  
Long Run ◽  
Time Period ◽  
Fiscal Balance ◽  
Short Run ◽  
Asean Countries ◽  
Age Dependency Ratio

This paper aims to examine the potential determinants of current account balance, which has been an interesting research topic in analysis over the decade. The relationship between current account balance and several different variables, such as fiscal balance, public debt, real GDP, and age dependency ratio for old and young, are examined. In this paper, the selected time period is from 1990 to 2016, in order to include the financial crisis period in six ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam). To this end, the research is based on the estimation of panel unit root, panel cointegration, panel Vector Error-Correction Model (VECM) and panel Granger causality. The findings show that all variables are cointegrated in the long-run and there are also unidirectional and bidirectional causal relationships in the short-run.

Re-examining public debt and current account dynamics: SVAR evidence from Ethiopia

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wondemhunegn Ezezew Melesse
Keyword(s):  
Current Account ◽  
Public Debt ◽  
Public Investment ◽  
Government Debt ◽  
Current Account Balance ◽  
Investment Efficiency ◽  
Content Type ◽  
Current Account Dynamics ◽  
Fiscal Balance ◽  
Short Run

PurposePublic debt management is now an integral part of overall macroeconomic management in many developing and emerging market economies. Preventing unsustainable debt accumulation and maintaining healthy fiscal profile begins with understanding its key drivers both in the short and in the long run. The purpose of this paper is to analyze public debt and current account dynamics in Ethiopia.Design/methodology/approachThis study applies structural vector auto-regressive (SVAR) model on annual time series data to study general government debt and current account dynamics in Ethiopia for the period 1980–2018.FindingsBoth the impulse response and forecast error variance decomposition results confirm that fiscal balance exerts the strongest influence on both government debt and current account balance in the short run. In addition, own shock as well as shocks stemming from gross fixed capital formation and growth have significant effects on general government debt. The findings were robust to alternative data transformation, differing Choleski ordering of the model variables, and inclusion of exogenous deterministic terms that capture changes in the political landscape.Practical implicationsThe most important implication is that since fiscal balance is the strongest determinant of both public debt and current account balance, public investment efficiency is relevant here than anywhere else in the national economy. A recent study by Barhoumi et al. (2018) found that the sub-Saharan region lags behind its peers in terms of public sector investment efficiency with inefficiency gap of as large as 54% depending on the indicator variable for public investment output. Improving public investment spending efficiency would reduce government debt by enhancing productivity and growth – which has significant negative effect on public debt.Originality/valueFirst, the few studies conducted on Ethiopia are dominated by single equation specifications and do not account for the possibility of endogenous feedback effects among the model variables. Second, still equally important is the role of rising gross fixed capital formation in Ethiopia, which increased from about 13% (relative to GDP) in the 1980s to about 35% in the 2010s. Ignoring this variable amounts to a major model misspecification when analyzing short-run macro dynamics in low-income economies. Finally, the paper complements existing limited studies on Ethiopia by comparing the strength of shock propagation mechanisms using alternative data transformation techniques.

Is there any Long-run Relationship between India’s Current and Capital Account Balance? A Time Series Analysis

2012 ◽  
Vol 13 (3) ◽  
pp. 433-447 ◽  
Author(s):  
Debashis Chakraborty ◽  
Jaydeep Mukherjee ◽  
Tanaya Sinha
Keyword(s):  
Current Account ◽  
Structural Breaks ◽  
Research Question ◽  
Empirical Studies ◽  
Structural Break ◽  
Current Account Balance ◽  
Capital Account ◽  
Long Run ◽  
Account Convertibility ◽  
The Individual

The long-run relationship between current account balance (CAB) and capital account balance (KAB) and the repercussions of capital account convertibility (KAC) on the growth process of a country is a much-debated issue. In particular, in the aftermath of the Southeast Asian crisis, the limitation of the liberal capital regime for a developing country like India is often highlighted in the literature. However, the probable impact of introducing KAC on CAB in India is generally discussed theoretically. Though some empirical studies in India have recently focused on this research question, the current paper contributes to the literature first, by exploring the presence of any endogenous structural breaks in the individual series of CAB and KAB and then examining the nature of long-run relationship between them. Applying the ARDL method of co-integration, the empirical findings support the presence of a long term co-integrating relationship between capital and current account balance and reveals that a significant structural break is observed during 2002–03 for both the series.

scholarly journals Analyzing Fiscal Balance Evolution for Developed and Emerging Countries

2016 ◽  
Vol 63 (3) ◽  
pp. 299-310
Author(s):  
Gheorghita Dinca ◽  
Marius Sorin Dinca ◽  
Catalina Popione
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Current Account ◽  
Public Debt ◽  
Current Account Balance ◽  
Time Interval ◽  
Independent Variables ◽  
Sustainable Fiscal Policy ◽  
Fiscal Balance ◽  
Sustainable Economic Growth

The purpose of our paper is to analyze the main factors which influence fiscal balance’s evolution and thereby identify solutions for configuring a sustainable fiscal policy. We have selected as independent variables some of the main macroeconomic measures, respectively public debt, unemployment rate, economy openness degree, population, consumer goods’ price index, current account balance, direct foreign investments and economic growth rate. Our research method uses two econometric models applied on a sample of 22 countries, respectively 14 developed and 8 emergent. The first model is a multiple regression and studies the connection between the fiscal balance and selected independent variables, whereas the second one uses first order differences and introduces economic freedom as a dummy variable to catch the dynamic influences of selected measures upon fiscal result. The time interval considered was 1999-2013. The results generated using the two models revealed that public debt, current account balance and economic growth significantly influence the fiscal balance. As a consequence, the governments need to plan and implement a fiscal policy which resonates with economy priorities and the phase of the economic cycle, as well as ensure a proper management of the public debt, stimulate sustainable economic growth and employment.

scholarly journals Contradicting the twin deficits hypothesis: The role of tax revenues composition

2014 ◽  
Vol 61 (6) ◽  
pp. 653-667 ◽  
Author(s):  
Alka Obadic ◽  
Tomislav Globan ◽  
Ozana Nadoveza
Keyword(s):  
Current Account ◽  
Economic Transformation ◽  
Current Account Balance ◽  
Twin Deficits ◽  
Main Hypothesis ◽  
Tax Revenues ◽  
Fiscal Balance ◽  
Tax Systems ◽  
The Current Account

The general theory of twin deficits hypothesis does not consider specific characteristics of domestic tax systems, i.e. whether the revenue side of the budget is dominated by indirect or by direct taxes. The main hypothesis of the paper is that in countries with fiscal systems dominated by indirect taxes, the deterioration of the current account balance would imply higher fiscal revenues due to larger imports and consumption. The hypothesis is based on the characteristics of domestic tax systems of Bulgaria, Croatia, Poland and Romania in which indirect tax revenues account for the majority of total budget tax revenues. Results suggest that the co-movements of the current account and the fiscal balance cannot be explained by the twin deficit theory in countries with indirect tax-oriented systems. These results imply that only the structural economic transformation and export orientation of the economy may reverse the causality direction between two deficits.

scholarly journals EXAMINING THE TWIN DEFICIT HYPOTHESIS: EVIDENCE FROM SELECTED SADC COUNTRIES (1980-2011)

2019 ◽  
Vol 2 (1) ◽  
pp. 1-16
Author(s):  
REGINALD CHAONEKA
Keyword(s):  
Granger Causality ◽  
Current Account ◽  
Causal Relation ◽  
Granger Causality Test ◽  
Series Data ◽  
Current Account Balance ◽  
Fiscal Consolidation ◽  
Causality Test ◽  
Fiscal Balance ◽  
The Current Account

This paper investigates the existence of a causal relationship between fiscal balance and current account balance over the period 1980-2011, for nine SADC countries individually. The analysis is conducted within the framework of Granger causality test and Vector Auto Regression (VAR) approach on time series data for each individual country estimates. The Granger causality test results confirm the twin-deficit relationship, with a causal relation from fiscal deficits to external deficits for two countries: Malawi and Zambia together with SADC group average; inverse link operating from external balance to fiscal balance for another two countries: Zimbabwe and Swaziland. Existence of bi-directional causality was confirmed for Botswana and Ricardian Equivalence Hypothesis was confirmed for Mozambique. Results for Angola, South Africa and Seychelles were ambiguous hence inconclusive. The results point to the existence of a direct causal link from fiscal deficit to external deficit. There are indications that fiscal tightening (budget cuts) tends to correct the current account deficit directly. There is need for government to develop new exports, primary products beneficiation (value addition), use of nanotechnology and nurturing new export industries as a long-term measure.In Zimbabwe and to some extent Swaziland the current account can be used to address the budget balance. Countries such as Malawi and Zambia, which have shown evidence of the twin deficit, imply that policymakers must consider fiscal consolidation. Fiscal consolidation has proved to be effective;however half-hearted fiscal adjustments are doomed to fail. The relationship between the twomacroeconomic variables changes over time depending on the dynamics of the economy. Again, given the intricacies that are innate in mixed economies, it may not be possible to authenticate a tight and steady connection between the two deficits. Government Organizations.

scholarly journals Econometric Analysis of the Developing Countries’ Trade Indicators

2018 ◽  
Vol 6 (2) ◽  
pp. 41-50
Author(s):  
Dr. Debesh Bhowmik
Keyword(s):  
Growth Rate ◽  
Developing Countries ◽  
Current Account ◽  
Concentration Index ◽  
Structural Breaks ◽  
Inflation Rate ◽  
Econometric Analysis ◽  
Current Account Balance ◽  
Var Models ◽  
Import Share

In this paper, the author attempted to study the patterns of the export and import shares of the developing countries and found out the relation of export and import share with its determinants like growth rate, inflation rate, FDI, current account balance, REER, concentration index, and diversification index respectively during 1980-2016 where FDI, REER, and diversification index significantly influenced the export and import shares respectively. Both the export and import shares have upward structural breaks and smooth cyclical trends. Their VAR models are unstable and non-stationary.

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