Working Paper: NBER ID: w7581
Authors: Menzie Chinn; Eswar S. Prasad
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. We find that 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 associated with current account balances while indicators of openness to international trade are negatively correlated with current account balances.
Keywords: No keywords provided
JEL Codes: F32; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government budget balances (H69) | current account balances (F32) |
| initial stocks of net foreign assets (F32) | current account balances (F32) |
| youth dependency ratios (J13) | current account balances (F32) |
| financial deepening (O16) | current account balances (F32) |
| trade openness (F43) | current account balances (F32) |