scholarly journals The Role of Sovereign Wealth Funds in Promoting the External Stability of the Home Economy

2018 ◽  
Vol 5 (9) ◽  
pp. 96
Author(s):  
Osama El-Baz
Keyword(s):  
Current Account ◽  
Global Economy ◽  
Government Expenditure ◽  
Dynamic Panel Data ◽  
Current Account Balance ◽  
Sovereign Wealth Funds ◽  
Data Set ◽  
External Stability ◽  
The Current Account

<p>Sovereign Wealth Funds (SWFs) are currently playing an important role in the global economy. We investigated the role of SWFs in promoting the external stability of the home economy using a data set spanning 106 countries over the period (1997-2015), whereby Arellano- Bond dynamic panel data models were employed to assess the treatment effect of SWFs on both the level of the current account balance and its volatility. Empirical results revealed that SWFs can play an important role in smoothing the management of the current account balance in the long run. Nonetheless, commodity-based SWFs are expected to outperform non-commodity based SWFs in this respect. Our policy recommendation is that emerging economies should consider the establishment of SWFs to enhance the external stability of their home economies, allocating privatization proceeds to these investment vehicles to protect the rights of future generations in benefiting from them rather than directing such proceeds to finance current government expenditure and budget deficit. Finally, attention should be paid to the implementation of the generally accepted principles and practices when establishing SWFs to ensure their ability to function properly.  </p>

scholarly journals Current Account Balance in Emerging Asia

2021 ◽  
Vol 16 (1) ◽  
pp. 12-25
Author(s):  
Kivanç Halil Ariç ◽  
Siok Kun Sek ◽  
Miguel Rocha de Sousa
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Current Account ◽  
Causal Effect ◽  
Panel Data Analysis ◽  
Government Expenditure ◽  
Current Account Balance ◽  
Important Indicator ◽  
Long Run ◽  
The Current Account

Abstract The current account balance is an important indicator which reveals information on a country’s economic situation such as investments, capital flows, and indebtedness. The main purpose of this study is to examine the current account balance conditions in emerging Asian countries. In this respect, the long-run and causality relationship between current account balance, economic growth, government expenditure, real interest rates, and foreign direct investment was examined. The panel data analysis was applied using the data dated 1986 to 2015. Our results revealed a causal effect from economic growth and government expenditure to current account balance mainly dependent on saving tendency.

scholarly journals Contradicting the twin deficits hypothesis: The role of tax revenues composition

2014 ◽  
Vol 61 (6) ◽  
pp. 653-667 ◽  
Author(s):  
Alka Obadic ◽  
Tomislav Globan ◽  
Ozana Nadoveza
Keyword(s):  
Current Account ◽  
Economic Transformation ◽  
Current Account Balance ◽  
Twin Deficits ◽  
Main Hypothesis ◽  
Tax Revenues ◽  
Fiscal Balance ◽  
Tax Systems ◽  
The Current Account

The general theory of twin deficits hypothesis does not consider specific characteristics of domestic tax systems, i.e. whether the revenue side of the budget is dominated by indirect or by direct taxes. The main hypothesis of the paper is that in countries with fiscal systems dominated by indirect taxes, the deterioration of the current account balance would imply higher fiscal revenues due to larger imports and consumption. The hypothesis is based on the characteristics of domestic tax systems of Bulgaria, Croatia, Poland and Romania in which indirect tax revenues account for the majority of total budget tax revenues. Results suggest that the co-movements of the current account and the fiscal balance cannot be explained by the twin deficit theory in countries with indirect tax-oriented systems. These results imply that only the structural economic transformation and export orientation of the economy may reverse the causality direction between two deficits.

What Explains Current Account Surplus in Korea?

2018 ◽  
Vol 17 (2) ◽  
pp. 70-93
Author(s):  
Chirok Han ◽  
Kwanho Shin
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Current Account ◽  
Current Account Balance ◽  
Budget Deficits ◽  
Current Account Surplus ◽  
Short Run ◽  
The Right ◽  
The Impact ◽  
The Current Account

Since the currency crisis in 1998, Korea has experienced continuous current account surpluses. Recently, the current account surplus increased more rapidly—amounting to 7.7 percent of GDP in 2015. In this paper, we investigate the underlying reasons for the widening of Korea's current account surpluses. We find that the upward trend in Korea's current account surpluses is largely explained by its demographical changes. Other economic variables are only helpful when explaining short run fluctuations in current account balances. Moreover, we show that Korea's current account surplus is expected to disappear by 2042 as it becomes one of the most aged economies in the world. Demographic changes are so powerful that they explain, quite successfully, the current account balance trends of other economies with highly aged populations such as Japan, Germany, Italy, Finland, and Greece. When we add the real exchange rate as an additional explanatory variable, it is statistically significant with the right sign, but the magnitude explained by it is quite limited. For example, to reduce the current account surplus by 1 percentage point, a 12 percent depreciation is needed. If Korea's current exchange rate is undervalued 4 to 12 percent less than the level consistent with fundamentals, it is impossible to reduce Korea's current account surplus to a reasonable level by adjusting the exchange rate alone. Another way to reduce current account surplus is to expand fiscal policies. We find, however, that the impact of fiscal adjustments in reducing current account surplus is even more limited. According to our estimates, reducing the current account surplus by 1 percentage point requires an increase in budget deficits (as a ratio to GDP) of 5 to 6 percentage points. If we allow endogenous movements of exchange rate and fiscal policy, the impact of exchange rate adjustment increases by 1.6 times but that of fiscal policy decreases that it is no longer statistically significant.

scholarly journals The Harberger-Laursen-Metzler Effect: Evidence from Pakistan

2012 ◽  
Vol 17 (2) ◽  
pp. 87-110 ◽  
Author(s):  
Tayyaba Idrees ◽  
Saira Tufail
Keyword(s):  
Time Series ◽  
Current Account ◽  
Vector Autoregression ◽  
Real Income ◽  
Terms Of Trade ◽  
Temporary Increase ◽  
Current Account Balance ◽  
Time Series Dataset ◽  
The Current Account

According to the Harberger-Laursen-Metzler (HLM) effect, an exogenous temporary increase in the terms of trade leads to an improvement in the current account balance. This paper uses a recursive vector autoregression to investigate empirically the existence of the HLM effect in Pakistan, using a time series dataset for the period 1980–2009. Two important results emerge. First, real income deteriorates with an improvement in the terms of trade. Second, the current account balance also responds negatively to innovations in the terms of trade, which implies that the HLM effect does not exist in Pakistan.

scholarly journals Financial Liberalization and Current Account Developments in New EU Member States

2020 ◽  
Vol 23 (1) ◽  
pp. 141-154
Author(s):  
Zdenka Obuljen Zoričić ◽  
Boris Cota ◽  
Nataša Erjavec
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Positive Sign ◽  
Current Account Balance ◽  
Financial Openness ◽  
Member States ◽  
Eu Member States ◽  
New Eu Member States ◽  
The Eu ◽  
The Current Account

AbstractDue to negotiations on accession to the EU, the new EU member states from Central and Eastern Europe went through the financial opening. In the pre-crisis period followed by high liquidity in global markets, most of the EU new member states experienced rapid credit growth, which conditioned the appreciation of the exchange rate. External imbalances and vulnerabilities built up. Countries experienced deterioration in their current accounts. This paper investigates the link between financial openness, real effective exchange rate, financial crisis and current account balance within the Panel Auto-Regressive Distributed Lag (ARDL) framework for 11 new European Union members during the period from 1999 to 2016. The results obtained by the use of pooled mean group estimator (PMG) show that in the long run, financial openness has a significant negative impact on the current account balance. In the short run, crisis significantly influences the current account balance having a positive sign.

The long run influence of pension systems on the current account

2019 ◽  
Vol 20 (1) ◽  
pp. 67-101
Author(s):  
Thomas Davoine
Keyword(s):  
Current Account ◽  
Overlapping Generations ◽  
Current Account Balance ◽  
Current Account Surplus ◽  
Pension Systems ◽  
Long Run ◽  
Funded Pensions ◽  
Future Consumption ◽  
Cross Country ◽  
The Current Account

AbstractExplaining cross-country differences in current accounts is difficult. While pay-as-you-go pensions reduce the need to save for retirement, contributions to capital-funded pensions are saved for future consumption. An overlapping-generations analysis shows that capital-funded pensions increase net foreign assets holdings. With a multi-pillar system whose capital-funded part accounts for 18% of pensions, the Austrian current account balance would be 1 percentage point of gross domestic product (GDP) higher than with pure pay-as-you-go pensions in 20 years. By comparison, the Austrian current account surplus averages 1.8% of GDP. Empirically, I find that the current account of high-income countries increases with the coverage and replacement rates of capital-funded pensions.

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