Analysis of the Current Account Position of Four Asian Countries Before the 1997 Crisis

Purpose -The purpose of this paper is to determine whether current account imbalancessurpluses or deficits -are "excessive" and hence constitute a valid concern. The second objective is to assess the degree of capital mobility by comparing the variance of the current account derived from the intertemporal model with that of the actual current account. Design/methodology/approach -The paper addresses the issues by constructing the intertemporal model using annual data between 1960 and 2006. The authors applied the F-test, the Bartlett test and the Siegel-Tukey test to formally validate for equality of the variances of the optimal and actual consumption smoothing current accounts. Findings -Based on vector autoregressive model, it was found that the present value of future net output closely reflects the evolution of the current account series with a small (insignificant) deviation between the actual and the estimated consumption-smoothing current account. The results show that the hypothesis of full-consumption smoothing could not be rejected by the data for the full sample period, implying that the degree of capital mobility was quite high, even during the post-1997 period. The variance ratio of the actual current account to the optimal current account is not statistically greater than one. Therefore, it is concluded that there is no evidence to suggest inappropriate use of capital flows over the entire sample period under investigation. Originality/value -The authors relied on a more general framework, as suggested by Bergin and Sheffrin, which allows real interest rate to affect current account in order to provide a new perspective on Thailand's current account balance.

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Do Imports and Exports Adjust Nonlinearly? Evidence from 100 Countries

Arize

Bahmani‐Oskooee

2018

Glob. Econ. J.

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A country is said to live within its international budget constraint if its exports and imports are cointegrated. Previous studies that tried to verify the cointegration between exports and imports used linear models and supported the theory in almost 50% of countries. In this paper, when we use the nonlinear ARDL approach and asymmetry cointegration method, we support the long-run link between imports and exports in 94 out of 100 countries in our sample. This study is not only the most comprehensive study in the literature, but it is also the first to show that, indeed, trade flows adjust in a nonlinear fashion.Example of studies that have failed to support cointegration between imports and exports include Baharumshah et al. (2003), who tested the hypothesis for Asian countries; Narayan and Narayan (2005), for 22 least developed countries; Tang and Alias (2005), for 27 member countries of the Organization of Islamic Conferences, who found support for cointegration in the four countries of Benin, Burkina Faso, Cameroon, and Guyana. Other studies rejecting cointegration between exports and imports include Tang (2006), who used data from Japan; Andreosso-O'Callaghan and Kan (2007), who examined the experiences of crisis-hit Asian countries; Laszlo and Pal (2008), who used Indian data; and Husein (2014), who examined data from nine Middle East and North African (MENA) countries and found evidence of cointegration between the exports and imports of Iran, Israel, Jordan, and Tunisia only.One common feature of all the above-mentioned studies is that they have assumed that the effects of exports (imports) on imports (exports) are symmetric or that the adjustment of trade flows is linear. However, there are reasons to believe that the effects could be asymmetric.Assume an X% increase in exports leads to a Y% increase in imports. The symmetry assumption implies that an X% decrease in exports will lead to a Y% decline in imports. However, if a country is more dependent upon imports than of inputs, that country may chose to borrow and not to allow its imports to decline by Y%, hence the asymmetric response of imports to exports.

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Analysis of the Current Account Position of Four Asian Countries Before the 1997 Crisis

Cited by 4 publications

References 39 publications

Are the current accounts of Asian-5 economies mean-reverting? New evidence from Fourier panel stationarity tests

Are the current accounts of Asian-5 economies mean-reverting? New evidence from Fourier panel stationarity tests

The present value model and Thailand's current account balance

Do Imports and Exports Adjust Nonlinearly? Evidence from 100 Countries

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