Are Asian countries’ current accounts sustainable? Deficits, even when associated with high investment, are not costless

Kim, Bong-Han; Min, Hong-Ghi; Hwang, Young-Soon; McDonald, Judith A.

doi:10.1016/j.jpolmod.2008.08.001

Cited by 45 publications

(30 citation statements)

References 29 publications

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“…They also indicate superior performance of nonlinear unit root over conventional ADF test. This conclusion is also supported by Christopoulos and Leon-Ledesma (2010), and Kim, et al (2009). In addition to these studies, Boengiu, et al (2011) use a quantile autoregression model to test for the external debt sustainability of Romania.…”

Section: Literature Reviewmentioning

confidence: 70%

The Sustainability of External Debt in OECD Countries: Evidence from Quantile Autoregression

Lin¹

2014

RWE

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This paper will investigate the sustainability of external debt for 21 OECD countries. We modify the solvency condition in an open economy derived by Sawada (1994). The quantile autoregression (QAR) model is applied to test the stationary property of the net external surplus process. The empirical results show that at each quantitle, the net external surplus process is stationary for six countries. It reveals a unit root behavior for the US at each quantile. However, there is a varied behavior across different quantiles for 14 countries. It indicates the asymmetric dynamic behavior of the net external surplus process.

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Section: Literature Reviewmentioning

confidence: 70%

The Sustainability of External Debt in OECD Countries: Evidence from Quantile Autoregression

Lin¹

2014

RWE

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“…Our procedure for the selection of the most appropriate nonlinear process for each country is based on the minimum inf-t test, taken over the set of inf-t test values obtained under the different nonlinear alternatives. A similar approach can be found in Kim (2005) and Kim et al (2009). Nevertheless, this selection rule could be misleading if the performance of the PS test does not depend upon the true nonlinear data generation process under the alternative.…”

Section: Notesmentioning

confidence: 99%

Current account sustainability in Latin America

Donoso

Barroso

2013

The Journal of International Trade & Economic Development

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This paper examines the sustainability of the current account deficit in eighteen Latin American countries through the analysis of the stationarity properties of the current account balance. First, we apply traditional unit root tests and consider the possibility of structural breaks. Second, since the current account may have a nonlinear behaviour, we test for linearity in the data and analyse current account stationarity by means of a recently developed nonlinear unit root test. Results from linear and nonlinear unit root tests show that current account sustainability is supported for the majority of Latin American countries with the exception of Argentina, Brazil, Chile and Paraguay. For the Dominican Republic, Honduras, Mexico, Panama, Peru, Uruguay and Venezuela the current account dynamics are best described by a stationary linear model, and by a stationary linear model with a mean shift in years 2003, 1982 and 1980 in Bolivia, Costa Rica and Nicaragua, respectively. In the case of Colombia, Ecuador, El Salvador and Guatemala, results show that the current account is best described by a mean-reverting nonlinear process.

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“…Since the optimal current account gives an indication of what a country's current account position ought to be, policy makers must seek to implement measures to narrow the gap between optimal and actual current account balances. This approach has been implemented by Cashin and McDermott (1998) for Australia, Makrydakis (1999) for Greece, Hudson and Robert (2003) for Jamaica, Ogus and Niloufer (2006) for Turkey, Goh (2007) for Malaysia, Khundrakpam and Rajiv (2008) for India, Kim, et al (2009) for Indonesia, Malaysia, South Korea, the Philippines and Thailand and Karunaratne (2010) for Australia in order to assess the current account deficit sustainability.…”

Section: Literature Reviewmentioning

confidence: 99%

The Current Account Deficit Sustainability: An Empirical Investigation for Pakistan

Mukhtar¹,

Khan²

2022

pdr

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The existence of large and persistent current account deficit is always viewed with great concerns, as it usually leads an economy to a state of insolvency due to building up excessive net foreign debt. As the current account deficit is a persistent feature of Pakistan’s economy, therefore, it becomes essential to empirically investigate, whether this deficit is sustainable or not. To this end, the present study has applied two alternative approaches, namely, the intertemporal approach to the current account and the intertemporal solvency approach, in order to get more convincing evidence on the sustainability issue in Pakistan using the time series data over the period 1960 to 2012. From the perspective of both the approaches, Pakistan’s current account deficit is on a sustainable path and the macroeconomic policies of the country remained effective in securing it from any external sector crisis. JEL Classification: C32, F32, F41 Keywords: Current Account Deficit, Intertemporal Budget Constraint, VAR Model, Cointegration

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Are Asian countries’ current accounts sustainable? Deficits, even when associated with high investment, are not costless

Cited by 45 publications

References 29 publications

The Sustainability of External Debt in OECD Countries: Evidence from Quantile Autoregression

The Sustainability of External Debt in OECD Countries: Evidence from Quantile Autoregression

Current account sustainability in Latin America

The Current Account Deficit Sustainability: An Empirical Investigation for Pakistan

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