Current account balances and output volatility

Ceyhun Elgin and Tolga Kuzubas

Economic Modelling, 2013, vol. 33, issue C, 381-387

Abstract: In this paper, we examine the empirical relationship between current account balance and output volatility in a panel data framework using annual data from 185 countries over the period from 1950 to 2010. In our static panel data analysis, we find that a larger current account deficit is associated with higher output volatility, particularly for emerging market economies. Our analysis reveals that this association strongly interacts with GDP per-capita. In order to account for possible endogeneity and feedback effects, we also employ a Panel-VAR framework and show that output volatility gives a significant positive response to a shock in the current account balance and a negative response to the shocks on GDP per-capita capita.

Keywords: Current account balances; Business cycle volatility; Panel data (search for similar items in EconPapers)
JEL-codes: C33 E32 F43 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:33:y:2013:i:c:p:381-387

DOI: 10.1016/j.econmod.2013.04.032

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