Stochastic trends and balance of payments crises

Mohamed Ben Abdallah and Taoufik Rajhi
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Mohamed Ben Abdallah: TEAM - Université Paris 1

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: In this paper we investigate the importance of domestic nominal and real shocks on the fluctuations of the exchange rate and the current account balance in four countries: South Korea, Indonesia, Thailand and Mexico. We also analyse the effect of the budgetary deficit and the monetary policy on their exchange rate and their current account balance. We use the recently developed multivariate cointegration analysis followed by the model of common trends, the vector error correlation modelling, the impulse response functions and the variance decompositions. The results presented in this paper suggest that Asian countries have exposed their economy to external shock that have rendered their economy vulnerable to them. Consequently, we suggest that we must search the causes of Asian crises in the external shocks that have hit the Asian economy

Keywords: Cointegration; common trends; fluctuations; nominal exchange rate; current account Asian crises and variances decompositions (search for similar items in EconPapers)
JEL-codes: F32 F41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2000-05
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Related works:
Working Paper: Stochastic Trends and Balance of Payments Crises (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:bla00068

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