Macroeconomic and Institutional Drivers of Current Account in Developing Asian Countries

2021 ◽  
Vol 40 (1) ◽  
Author(s):  
Fareeha Safdar ◽  
Attiya Y Javid ◽  
Muhmmad Sheraz
Keyword(s):  
Current Account ◽  
Trade Openness ◽  
Real Effective Exchange Rate ◽  
Asian Countries ◽  
Institutional Variables ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact ◽  
Current Account Balances ◽  
The Current Account

This study empirically investigates the impact of macroeconomic and institutional variables on the current account balances of nine selected developing Asian countries over the period of 1984-2018. The Fixed Effect (FE) technique that helps to identify the major variables that can affect the dependent variable i.e., current account has been used to analyze data. The results indicate that trade openness; domestic relative income and real effective exchange rate are the variables which are significant and positively associated with the current account balances of developing Asian countries. However, when the institutional variables are included i.e. law &order and bureaucratic quality have turned out to have the significant effect on current account as well.  The dummy variable is also introduced to compare the ASEAN region with South Asian region. The results suggest that it has positive and significant effect on the current account balances of ASEAN.

scholarly journals Structural Reforms and External Rebalancing

2017 ◽  
Vol 17 (182) ◽  
Author(s):  
Alexander Culiuc ◽  
Annette Kyobe
Keyword(s):  
Current Account ◽  
Positive Impact ◽  
Real Effective Exchange Rate ◽  
Current Account Balance ◽  
Structural Reforms ◽  
Tradable Sector ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate ◽  
The Current Account

Empirical research on structural reforms has focused primarily on their impact on growth and productivity. Yet an often-invoked rationale for structural reforms is their impact on external adjustment. This paper finds little evidence that structural reforms improve the current account in the short run, but they can increase the responsiveness and resilience of the economy to external shocks. In particular, elasticities of exports with respect to the real effective exchange rate increase with some structural indicators, suggesting that structural reforms facilitate the reallocation of resources to the tradable sector in response to a negative external shock. The paper concludes that structural reforms, while not having an immediate positive impact on the current account balance, can be an important complement to traditional macroeconomic adjustment.

The Sources of Indonesia’s Current Account Balance Fluctuations: An Empirical Test of the Vector Error Correction Model (VECM)

2014 ◽  
Vol 2 (1) ◽  
pp. 16
Author(s):  
Tri Winarno
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Current Account Balance ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Exchange Rate Depreciation ◽  
The Current Account

Identifying the sources of current account balance fluctuations is critical to formulating Indonesia’s macroeconomic policies which maintain both internal and external balance to guarantee sustainable economic development as mandated by The Central Bank of Indonesia Act. This study is an attempt to investigate the long-run relationship between the current account balance (including total trade balance and non-oil and gas trade balance), world exports, domestic income (a proxy by industrial production index), and real effective exchange rate in the case of Indonesia’s economy. Based on the traditional approach of elasticity (Marshall Lerner condition) and by applying the VECM method to monthly data for the period January of 2008 up to December 2012, the investigation to examine the existence of a long-run equilibrium relationship between the current account balance and its sources is conducted. Additionally, variance decompositions (VDCs) and impulse response functions (IRFs) are used to draw further inferences. The result of the VECM method indicates that there is a stable long-run relationship between the current account balance and real effective exchange rate, domestic income and world exports variables. The estimated results show that real effective exchange rate depreciation is positively related to the current account balance in the long run, consistent with the Marshall Lerner condition. This study also finds evidence of the J-curve on Indonesia's current account balance. This suggests that following a real effective exchange rate depreciation, the Indonesia current account balance will initially deteriorate but improve in the long-run. Thus the exchange rate policy can help improve the current account balance. Furthermore, the results provide strong evidence that world exports and domestic income play a strong role in determining the behavior of the current account balance. 

scholarly journals Cointegration Analysis of Exchange Rate Volatility and Agricultural Exports in Turkey: an Ardl Approch

2021 ◽  
Vol 9 (6) ◽  
pp. 1180-1185
Author(s):  
Turgut Orman ◽  
İlkay Dellal
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Cointegration Analysis ◽  
Real Effective Exchange Rate ◽  
Series Data ◽  
Producer Price ◽  
Agricultural Exports ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

This study aims to reveal the impact of exchange rate volatility on agricultural exports of Turkey by using the Autoregressive Distributed Lag Model. While quarterly time series data covering period of 2001: Q1 to 2018: Q4 were used to carry out analyses, Exponential Generalized Autoregressive Conditional Heteroscedasticity (1.1) is used to acquire exchange rate volatility series. The research findings showed that agricultural export is cointegrated with exchange rate volatility, producer price index and real effective exchange rate. Furthermore, our findings indicate that increases in real effective exchange rate have a statistically significant positive influence on the export volume whereas exchange rate volatility has negative impact on it.

Exchange Rate Volatility and International Trade-in

2020 ◽  
Vol 6 (5) ◽  
pp. 56-72
Author(s):  
Kanu Success Ikechi ◽  
Nwadiubu Anthony
Keyword(s):  
International Trade ◽  
Exchange Rate ◽  
Causal Effect ◽  
Decomposition Analysis ◽  
Real Effective Exchange Rate ◽  
Response Analysis ◽  
Effective Exchange ◽  
Trading Activities ◽  
Effective Exchange Rate ◽  
The Impact

This study investigates the impact of exchange rate volatilities on international trade in Nigeria. The research is carried under the assumption that exchange rate volatilities are deemed to impact on the volume of export and import trading activities. The study made use of Secondary data from 1996 to 2018. Econometric tools were used to ascertain relationships. The paper established a mixed result between the variables under review. While some of the tests did not provide adequate and predictive information on the relationship between exports, imports and real effective exchange rate, others did. The VAR model estimates indicate an inverse relationship between Export, Import and REER in current periods. A unit increase in export and import in a particular year leads to about 0.9% and 0.4% decrease in REER respectively. Variance decomposition analysis suggests that the shocks partially explain fluctuations in REER, as well as exports and imports. The Impulse response analysis indicates a negative association between export and real effective exchange rate while it was majorly positive for imports throughout the ten periods. The causal effect reveals that import causes exports but that exports do not granger cause imports. The ARCH modelling approach suggests the existence of a first-order Arch effect and a significant GARCH term. Though the Coefficient of GARCH in a mean term is negative; it produced a singular covariance which by itself is not unique. Results show evidence of volatility of REER clustering on import and export trading activities in Nigeria. This could have serious implications for growth in Nigeria, as a reduction in the growth of exports could reduce the foreign exchange earnings available for the financing of developmental projects. At the same time, a decline in imports could affect domestic production and consumption. It could also impinge negatively on the balance of payment positions for Nigeria. In line with these observations, monetary and fiscal interventions are required to mitigate the adverse effects since financial shocks often exacerbate exchange rate volatilities.

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