The impact of financial (de)regulation on current account balances

Enrique Moral-Benito and Oliver Roehn
Additional contact information
Oliver Roehn: OECD and CESIFO
Authors registered in the RePEc Author Service: Oliver Röhn ()

No 1424, Working Papers from Banco de España

Abstract: Global imbalances and financial market (de)regulation both feature prominently among the potential causes of the global financial crisis, but they have been generally discussed separately. In this paper, we take a different angle and investigate the relationship between financial market regulation and current account balances, an area for which there is limited empirical evidence. We use a panel of countries over the period 1980-2010 and employ a novel empirical approach which allows us to simultaneously account for model uncertainty, current account persistence and unobserved heterogeneity. We find robust evidence that financial market regulations affect current account balances and that different aspects of these regulations can have opposing effects on the current account. In particular we find that lowering bank entry barriers is negatively associated with the current account balance. In contrast, bank privatisation and securities market deregulation tend to raise current account balances. Our results also highlight the need to control for persistence and unobserved heterogeneity. Once we control for these factors, we find robust evidence for a wide range of current account theories in contrast to previous studies.

Keywords: current account; financial markets; financial regulation; Bayesian model averaging; model uncertainty (search for similar items in EconPapers)
JEL-codes: C11 F32 F41 G28 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-09
New Economics Papers: this item is included in nep-acc, nep-opm and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /14/Fich/dt1424e.pdf First version, September 2014 (application/pdf)

Related works:
Journal Article: The impact of financial regulation on current account balances (2016)
Working Paper: The Impact of Financial (De-)Regulation on Current Account Balances (2014)
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:bde:wpaper:1424

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().