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Macroeconomic, institutional and financial determinants of current account balances: a panel data assessment

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  • Yasin Baris Altayligil

    (Istanbul University)

  • Murat Çetrez

    (Ford Otomotiv Sanayi A.Ş.)

Abstract

This study aims to find out the fundamental macroeconomic, institutional and financial determinants of current account balances by using panel data analysis method. The analysis is carried out by using the data for the period between 1986 and 2013 of 97 developing and developed countries. We find that the determinants of current account balances can be related to the factors such as fiscal balance, growth, terms of trade, exchange rate, trade openness, stage of economic development, oil dependency, financial market development, macroeconomic stability and institutional quality. A rise in growth rate, real effective exchange rate, fiscal deficit, trade openness, institutional quality, financial market development and stage of development generates larger current account deficits. A rise in terms of trade, inflation rate (representing macroeconomic stability), crude oil export reduces the current account deficits. For industrial countries, macroeconomic stability and growth also have the opposite effect on current account balances compared with other groups. The legal system and property rights, voice and accountability, political stability and absence of violence, political risks are identified as the institutional determinants of current account balances.

Suggested Citation

  • Yasin Baris Altayligil & Murat Çetrez, 2020. "Macroeconomic, institutional and financial determinants of current account balances: a panel data assessment," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-23, December.
    • Handle: RePEc:spr:jecstr:v:9:y:2020:i:1:d:10.1186_s40008-020-00225-1
    DOI: 10.1186/s40008-020-00225-1
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    Cited by:

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    3. Afonso, António & Coelho, José Carlos, 2022. "The role of fiscal policies for external imbalances: Evidence from the European Union," Economic Systems, Elsevier, vol. 46(2).
    4. António Afonso & José Carlos Coelho, 2023. "Twin deficits through the looking glass: time-varying analysis in the Euro area," Economic Change and Restructuring, Springer, vol. 56(4), pages 2087-2110, August.
    5. Hassan B. Ghassan & Hassan R. Alhajhoj & Faruk Balli, 2022. "Bi-demographic and current account dynamics using SVAR model: evidence from Saudi Arabia," Economic Change and Restructuring, Springer, vol. 55(3), pages 1327-1363, August.
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    7. Murat Cetrez & Yasin Baris Altayligil, 2022. "The Role of Macroeconomic Stability in Current Account Balances," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-2), pages 569-597, December.
    8. Fassil Eshetu & Nega Eshetu, 2023. "Impact of Exchange Rate on Ethiopian Trade Balance: Evidence from ARDL Model," Annals of Data Science, Springer, vol. 10(5), pages 1217-1236, October.

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    More about this item

    Keywords

    Current account balances; Macroeconomic stability; Institutions; Financial development; Panel data;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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