Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration

40 Pages Posted: 29 Jan 2006  

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics

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Date Written: March 2000

Abstract

This paper provides an empirical investigation of the medium-term determinants of current accounts for a large sample of industrial and developing countries. The analysis is based on a structural approach that highlights the roles of the fundamental macroeconomic determinants of saving and investment. Cross-section and panel regression techniques are used to characterize the properties of current account variation across countries and over time. Current account balances are positively correlated with government budget balances and initial stocks of net foreign assets. Among developing countries, measures of financial deepening are positively correlated while indicators of openness to international trade are negatively correlated with current account balances.

Keywords: Current account variation, structural and macroeconomic determinants, saving-investment balance

JEL Classification: F32, F41

Suggested Citation

Chinn, Menzie David and Prasad, Eswar S., Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration (March 2000). IMF Working Paper, Vol. , pp. 1-40, 2000. Available at SSRN: https://ssrn.com/abstract=879437

Menzie David Chinn (Contact Author)

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

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Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

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Brookings Institution ( email )

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IZA Institute of Labor Economics

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