Economics at your fingertips  

Fiscal stance, foreign capital inflows and the behavior of current account in the Asian countries

Ahmad Zubaidi Baharumshah (), Siew-Voon Soon and Mark Wohar ()
Additional contact information
Siew-Voon Soon: Universiti Putra Malaysia

Empirical Economics, 2019, vol. 56, issue 2, 523-549

Abstract: Abstract This paper investigates the causality relationship between budget and current account deficits for 14 Asian countries. The major findings based on bootstrap Granger causality tests in heterogenous mixed panels are: First, investments (and foreign capital inflows) have a notable impact on the current account prior to the Asian financial crisis of 1997–1998. Second, we detect direct causality between the budget and the current account imbalances before but not after the crisis. The data suggest that the current account targeting hypothesis, that is, the reverse causality, prevails after the crisis. Third, budget deficits have a significant influence on both investment and foreign capital inflows in the second period. Fourth, Asian countries are less susceptible to the influence of FDI inflows in the aftermath of the crisis. Finally, structural break turns out crucial in assessing the causal patterns of the twin deficits nexus in the Asian countries.

Keywords: Global imbalances; Twin deficit hypothesis; FDI; Crisis; Asian (search for similar items in EconPapers)
JEL-codes: F41 F32 C10 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-06-19
Handle: RePEc:spr:empeco:v:56:y:2019:i:2:d:10.1007_s00181-017-1368-5