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Current Account Imbalances and Capital Flows

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  • B. Bayraktar-Saglam
  • A.Y. Yalta

Abstract

In this article, we attempt to evaluate the causality between the current account and foreign capital flows for the emerging markets over the period of 1980–2012, by applying the heterogeneous panel Granger causality framework. To the best of our knowledge, this is the first study that applies heterogeneous panel causality tests to explain the linkages between current account and the foreign capital flows. In addition to examining the effect of overall capital flows on the current account, we focus on the effects of different types of capital flows (foreign direct investment and portfolio investment) on the current account. We also investigate how the different types of capital flows affect gross domestic saving and gross domestic investment. We find that the causality relationship between foreign capital flows and current account is highly heterogeneous.

Suggested Citation

  • B. Bayraktar-Saglam & A.Y. Yalta, 2015. "Current Account Imbalances and Capital Flows," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 7(2), pages 201-213, May.
    • Handle: RePEc:sae:emeeco:v:7:y:2015:i:2:p:201-213
    DOI: 10.1177/0974910115574170
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    Cited by:

    1. Krittika Banerjee & Ashima Goyal, 2021. "Current account imbalances: Exploring role of domestic and external factors for large emerging markets," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2021-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Badar Alam Iqbal & Mohd Nayyer Rahman & Nadia Yusuf, 2018. "Determinants of FDI in India and Sri Lanka," Foreign Trade Review, , vol. 53(2), pages 116-123, May.
    3. Ismet GOCER & Tugba AKIN & Sedat ALATAS, 2016. "The effects of saving-investment gap on economic growth in developing countries: A clustering and panel data analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(607), S), pages 157-172, Summer.

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