IDEAS home Printed from https://ideas.repec.org/p/bcb/wpaper/362.html
   My bibliography  Save this paper

External Sustainability and Gross Positions: are Brazilian external accounts sustainable?

Author

Listed:
  • João Barata R. B. Barroso

Abstract

This paper characterizes external sustainability in the presence of arbitrary gross international positions. The analysis is based on the response of net exports to net foreign liabilities, and is relevant for a growing literature using the same response function approach without any qualification for gross positions. In particular, we propose parametric and nonparametric formal tests for long run sustainability. We also develop a risk assessment methodology for medium run sustainability. We apply the method to the Brazilian economy, also building a new historical data set and a detailed offshore oil scenario which are of independent interest. The empirical results support external solvency and shows relatively well behaved risks of adjustment as judged by the historical experience.

Suggested Citation

  • João Barata R. B. Barroso, 2014. "External Sustainability and Gross Positions: are Brazilian external accounts sustainable?," Working Papers Series 362, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:362
    as

    Download full text from publisher

    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps362.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 949-963.
    2. Pascal Towbin, 2013. "Financial Integration And External Sustainability," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 18(4), pages 375-395, October.
    3. Gustavo Adler & Mr. Sebastian Sosa, 2013. "External Conditions and Debt Sustainability in Latin America," IMF Working Papers 2013/027, International Monetary Fund.
    4. Hamid Faruqee, 1995. "Long-Run Determinants of the Real Exchange Rate: A Stock-Flow Perspective," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 80-107, March.
    5. Paul R. Bergin & Steven M. Sheffrin, 2017. "Interest Rates, Exchange Rates and Present Value Models of the Current Account," World Scientific Book Chapters, in: International Macroeconomic Interdependence, chapter 10, pages 287-316, World Scientific Publishing Co. Pte. Ltd..
    6. Henning Bohn, 2005. "The Sustainability of Fiscal Policy in the United States," CESifo Working Paper Series 1446, CESifo.
    7. Devereux, Michael B. & Sutherland, Alan, 2010. "Valuation effects and the dynamics of net external assets," Journal of International Economics, Elsevier, vol. 80(1), pages 129-143, January.
    8. Milesi-Ferretti, G-M & Razin, A, 1996. "Current-Account Sustainability," Princeton Studies in International Economics 81, International Economics Section, Departement of Economics Princeton University,.
    9. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
    10. Durdu, C. Bora & Mendoza, Enrique G. & Terrones, Marco E., 2013. "On the solvency of nations: Cross-country evidence on the dynamics of external adjustment," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 762-780.
    11. Sebastian Edwards, 2005. "Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly is Adjustment Likely To Be?," NBER Working Papers 11541, National Bureau of Economic Research, Inc.
    12. Christian Schoder & Christian R. Proaño & Willi Semmler, 2013. "Are The Current Account Imbalances Between Emu Countries Sustainable? Evidence From Parametric And Non‐Parametric Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(7), pages 1179-1204, November.
    13. Mr. Tomasz Wieladek & Mr. Sergi Lanau, 2012. "Financial Regulation and the Current Account," IMF Working Papers 2012/098, International Monetary Fund.
    14. Bohn, Henning, 2007. "Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint?," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1837-1847, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gustavo Adler & Sebastian Sosa, 2016. "External Factors in Debt Sustainability Analysis: An Application to Latin America?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(5), pages 81-120, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Charles Engel & John H. Rogers, 2006. "The U.S. current account deficit and the expected share of world output," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    2. Zorell, Nico, 2017. "Large net foreign liabilities of euro area countries," Occasional Paper Series 198, European Central Bank.
    3. Navarro-Ortiz, Josep & Sapena, Juan, 2020. "Is external debt sustainable? A probabilistic approach," Economic Modelling, Elsevier, vol. 93(C), pages 142-153.
    4. Oscar Bajo-Rubio & Carmen D Roldᮠ & Esteve, 2014. "Sustainability of external imbalances in the OECD countries," Applied Economics, Taylor & Francis Journals, vol. 46(4), pages 441-449, February.
    5. António Afonso & Florence Huart & João Tovar Jalles & Piotr Stanek, 2019. "Assessing the sustainability of external imbalances in the European Union," The World Economy, Wiley Blackwell, vol. 42(2), pages 320-348, February.
    6. Gnimassoun, Blaise & Mignon, Valérie, 2016. "How Do Macroeconomic Imbalances Interact? Evidence From A Panel Var Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 20(7), pages 1717-1741, October.
    7. Emir Zildžović, 2015. "The Sustainability Of Serbia`S External Position: The Impact Of Fiscal Adjustment And External Shocks," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 60(204), pages 31-60, January –.
    8. Vassilis Monastiriotis & Cigdem Borke Tunali, 2020. "The Sustainability of External Imbalances in the European Periphery," Open Economies Review, Springer, vol. 31(2), pages 273-294, April.
    9. D’Erasmo, P. & Mendoza, E.G. & Zhang, J., 2016. "What is a Sustainable Public Debt?," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2493-2597, Elsevier.
    10. Christian Schoder, 2014. "The fundamentals of sovereign debt sustainability: evidence from 15 OECD countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 247-271, May.
    11. Viviane Luporini, 2014. "Sustainability Of Brazilian Fiscalpolicy, Once Again: Corrective Policy Response Over Time," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 064, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    12. Akhmadieva, Veronika, 2022. "Fiscal adjustment in a panel of countries 1870–2016," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 555-568.
    13. António Afonso & Florence Huart & João Tovar Jalles & Piotr Stanek, 2020. "Long-run relationship between exports and imports: current account sustainability tests for the EU," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 19(2), pages 155-170, May.
    14. Neto, David, 2020. "Tracking fiscal discipline. Looking for a PIIGS on the wing," International Economics, Elsevier, vol. 163(C), pages 147-154.
    15. Choi, Horag & Mark, Nelson C. & Sul, Donggyu, 2008. "Endogenous discounting, the world saving glut and the U.S. current account," Journal of International Economics, Elsevier, vol. 75(1), pages 30-53, May.
    16. Stefan Collignon, 2010. "Fiscal Policy Rules and the Sustainability of Public Debt in Europe," RECON Online Working Papers Series 28, RECON.
    17. Blaise Gnimassoun, 2017. "Exchange rate misalignments and the external balance under a pegged currency system," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 949-974, November.
    18. Tilak Abeysinghe & Ananda Jayawickrama, 2013. "A segmented trend model to assess fiscal sustainability: The US experience 1929–2009," Empirical Economics, Springer, vol. 44(3), pages 1129-1141, June.
    19. Camarero, Mariam & Carrion-i-Silvestre, Josep Lluís & Tamarit, Cecilio, 2013. "Global imbalances and the intertemporal external budget constraint: A multicointegration approach," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5357-5372.
    20. Herkenhoff, Philipp & Sauré, Philip, 2021. "How expected inflation distorts the current account and the valuation effect," European Economic Review, Elsevier, vol. 135(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:362. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rodrigo Barbone Gonzalez (email available below). General contact details of provider: https://www.bcb.gov.br/en .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.