New perspectives on the rise and fall of global imbalances: evidence from large emerging market economies

Krittika Banerjee () and Ashima Goyal
Additional contact information
Krittika Banerjee: Indian Institute of Technology (ISM)

Review of World Economics (Weltwirtschaftliches Archiv), 2024, vol. 160, issue 2, No 9, 583 pages

Abstract: Abstract This paper estimates the impact of internal factors, such as governance institutions and financial development, versus external, such as capital flows uncertainty, on the excess savings of large emerging market economies (EMEs), identified as a major factor behind their trade surpluses. Using instrumental variables regression to control for endogeneity from institutions, we study eight major EMEs over 1995–2018 as well as a larger panel including both AEs and EMEs over 2001–2018 for robustness. Baseline estimates show that, along with financial development, democratic accountability and judiciary influence CA surpluses in both EMEs and AEs. Anti-corruption measures and government stability are influential specifically in AEs and EMEs respectively. For both EMEs and AEs, surpluses decrease with greater dependence on primary commodity exports supporting the “resource curse” thesis. That EME surpluses move negatively with better institutions and positively with capital flows uncertainty supports the precautionary motive. Sources of EME surpluses changed substantially from the pre- to the post-GFC years. During 2001–2008, higher growth, initial wealth, uncertainty in net capital flows increased surpluses. After 2008, reduced growth, lower CB intervention and better institutions rebalanced surpluses, particularly for Asia–Pacific nations.

Keywords: Global trade imbalances; Institutions; Resource curse; Precautionary savings; Anderson-Hsiao IV estimator; Bai-Perron test (search for similar items in EconPapers)
JEL-codes: F32 F40 F41 F42 (search for similar items in EconPapers)
Date: 2024
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10290-023-00508-2 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: https://EconPapers.repec.org/RePEc:spr:weltar:v:160:y:2024:i:2:d:10.1007_s10290-023-00508-2

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10290/PS2

DOI: 10.1007/s10290-023-00508-2

Access Statistics for this article

Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann

More articles in Review of World Economics (Weltwirtschaftliches Archiv) from Springer, Institut für Weltwirtschaft (Kiel Institute for the World Economy) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().