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Current accounts in the long run and the intertemporal approach: a panel data investigation

Tsoukis, Christopher; Cerrato, Mario; Kalyoncu, Huseyin; Hassan Naqvi, Naveed

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Authors

Mario Cerrato

Huseyin Kalyoncu

Naveed Hassan Naqvi



Abstract

This paper is a theory-based study of the long-run determinants of the current account (CA). For many OECD economies after the Second World War, there has been more long-run variation in the CA data than is emphasised by a ‘Permanent Income’ version of the intertemporal approach that is based on consumption-smoothing and that allows only transitory CA imbalances. A theoretical model of the CA is developed, based on the ‘broader’ variant of the intertemporal approach that stresses the long-term component of the CA. We find that some key theoretical predictions hold, while others fail, validating the approach but also pointing to its limitations.

Journal Article Type Article
Acceptance Date Apr 3, 2013
Publication Date Feb 1, 2015
Publicly Available Date Mar 28, 2024
Journal The World Economy
Print ISSN 0378-5920
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 38
Issue 2
Pages 340-359
DOI https://doi.org/10.1111/twec.12152
Publisher URL http://dx.doi.org/h10.1111/twec.12152

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