¿Cuáles son los Determinantes de la Cuenta Corriente? El Enfoque Intertemporal Aplicado a la República Dominicana (Macroeconomic Determinants of the Current Account Deficit in the Dominican Republic)

40 Pages Posted: 8 Dec 2011

See all articles by Carlos Gratereaux Hernández

Carlos Gratereaux Hernández

Autonomous University of Santo Domingo; Western Michigan University

Date Written: July 1, 2011

Abstract

The aim of this research is to identify which are the macroeconomic determinants the Current Account Deficit in the Dominican Republic for the period 1970-2009. We use the inter-temporal approach to the current account exposed by Obstfeld, M. & Rogoff, K. (1995), and augment the analysis with the estimation of a Partial Autoregressive Vector (PVAR) with the objective of capturing the dynamics effects and the relative importance of some of the factors collected on the economics literature.

According to the results, the inter-temporal model explains the behavior of the current account of the Dominican Republic and identifies the private investment as its principal determinant. From the PVAR’s results we have that positive shocks on the cyclical GDP, the public budget result, the real exchange rate over its equilibrium level and in the term of trade have positive impacts that lead to a decrease on the deficit. On another hand, monetary shocks over its level of equilibrium, in the cyclical foreign GDP and in the real external interest rate produce a worsening of the external deficit. Finally, as the Variance Decomposition results indicate, the most relevant determinant of the current account variability is the real exchange rate, fact that shows that the nominal exchange rate and its volatility are capital factors in the adjustment mechanism of the current account in an open and small economy.

Note: Downloadable document is in Spanish.

Keywords: Intertemporal Approach of the Current Account, VAR models

JEL Classification: C32, F32

Suggested Citation

Gratereaux Hernández, Carlos, ¿Cuáles son los Determinantes de la Cuenta Corriente? El Enfoque Intertemporal Aplicado a la República Dominicana (Macroeconomic Determinants of the Current Account Deficit in the Dominican Republic) (July 1, 2011). Available at SSRN: https://ssrn.com/abstract=1969160 or http://dx.doi.org/10.2139/ssrn.1969160

Carlos Gratereaux Hernández (Contact Author)

Autonomous University of Santo Domingo ( email )

Santo Domingo
Dominican Republic

HOME PAGE: http://www.uasd.edu.do

Western Michigan University ( email )

Kalamazoo, MI 49008
United States

HOME PAGE: http://www.wmich.edu/economics

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