1 Background
2 Empirical motivation
3 Literature review
4 Data and descriptive statistics
Variable description | Developed (27 countries, 864 annual obs.) | Emerging (32 countries, 1024 annual obs.) | Developing (47 countries, 1504 annual obs.) | |||
---|---|---|---|---|---|---|
Mean | Std. dev. | Mean | Std. dev. | Mean | Std. dev. | |
Current account balance (% of GDP) | −0.63 | 5.67 | −0.39 | 12.49 | 13.27 | 21.03 |
Real GDP growth rate | 2.60 | 2.84 | 4.40 | 5.34 | 3.32 | 4.92 |
∆ Real effective exchange rate | 0.34 | 6.89 | 0.06 | 13.17 | 0.68 | 25.71 |
Commodity price index | 40.54 | 72.89 | 128.7 | 76.29 | 135.8 | 71.61 |
Net foreign assets (% of GDP) | −21.56 | 41.65 | −16.34 | 74.31 | −78.84 | 85.63 |
Trade openness | 52.28 | 22.58 | 63.20 | 54.97 | 58.36 | 31.89 |
de jure capital openness | 0.73 | 0.32 | 0.46 | 0.33 | 0.36 | 0.29 |
Exchange rate stability index | 0.51 | 0.28 | 0.55 | 0.31 | 0.70 | 0.34 |
5 Estimation techniques
5.1 Panel unit root test
5.1.1 Levin–Lin–Chu (LLC) test
5.1.2 Im–Pesaran–Shin (IPS) test
5.2 GMM estimators for dynamic panel models
6 Results
6.1 Panel unit root test results
Variables | CAB (% of GDP) | Real GDP growth rate | ∆ REER | NFA (% of GDP) | Openness of trade |
---|---|---|---|---|---|
Levin–Lin–Chu (LLC) | −11.06*** | −30.62*** | −32.64*** | −5.19*** | −10.50*** |
Im–Pesaran–Shin (IPS) | −8.61*** | −31.09*** | −32.43*** | −3.19** | −7.15*** |
6.2 Basic results: persistency
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
POLS | FE | DGMM | SGMM | |
Lag 1. CAB (% of GDP) | 0.535*** | 0.434*** | 0.382*** | 0.378*** |
(0.017) | (0.018) | (0.004) | (0.005) | |
Lag 2. CAB (% of GDP) | 0.157*** | 0.065*** | 0.039*** | 0.024*** |
(0.017) | (0.017) | (0.002) | (0.002) | |
Lag 3. CAB (% of GDP) | 0.134*** | 0.053*** | 0.032*** | 0.038*** |
(0.012) | (0.012) | (0.003) | (0.004) | |
Lag 4. CAB (% of GDP) | 0.126*** | 0.047*** | 0.027*** | 0.024*** |
(0.014) | (0.013) | (0.003) | (0.003) | |
Observations | 3180 | 3180 | 3074 | 3180 |
R-squared | 0.42 | 0.47 | – | – |
Number of country | 106 | 106 | 106 | 106 |
6.3 Dynamic panel GMM estimation results
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Developed | Emerging | Developing | Full sample | |
Lag CAB (% of GDP) | 0.752*** | 0.396*** | 0.602*** | 0.420*** |
(0.026) | (0.006) | (0.061) | (0.0007) | |
Real GDP growth rate | −0.174*** | 0.627*** | −0.049*** | 0.383*** |
(0.015) | (0.049) | (0.012) | (0.002) | |
∆ REER | −0.019*** | −0.046*** | −0.0005 | −0.0007 |
(0.005) | (0.006) | (0.001) | (0.0006) | |
Commodity price index | −0.003 | 0.01** | 0.007*** | 0.009*** |
(0.004) | (0.004) | (0.002) | (0.0004) | |
Net foreign assets (% of GDP) | 1.502 | −8.069*** | 1.432** | −2.192*** |
(1.612) | (1.817) | (0.582) | (0.10) | |
Openness of trade | 0.022* | 0.096*** | 0.006** | 0.045*** |
(0.019) | (0.02) | (0.008) | (0.002) | |
de jure capital openness | −0.321 | −2.576 | −0.391 | −1.558** |
(3.352) | (2.443) | (4.472) | (0.313) | |
Exchange rate stability index | 2.171* | −1.171** | −1.177* | −1.767* |
(1.810) | (1.821) | (1.672) | (0.206) | |
Sargan test (p value) | 0.181 | 0.174 | 0.183 | 0.212 |
Hansen J test (p value) | 0.213 | 0.197 | 0.206 | 0.251 |
A–B test AR(1) (p value) | 0.042 | 0.021 | 0.001 | 0.003 |
A–B test AR(2) (p value) | 0.383 | 0.382 | 0.390 | 0.377 |
Observations | 837 | 992 | 1457 | 3286 |
Number of countries | 27 | 32 | 47 | 106 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Developed | Emerging | Developing | Full sample | |
Lag CAB (% of GDP) | 0.740*** | 0.407*** | 0.645*** | 0.414*** |
(0.045) | (0.003) | (0.013) | (0.001) | |
Real GDP growth rate | −0.225*** | 0.819*** | −0.049*** | 0.471*** |
(0.018) | (0.024) | (0.016) | (0.003) | |
∆ REER | −0.016*** | −0.103*** | −0.003** | −0.008*** |
(0.006) | (0.009) | (0.001) | (0.0009) | |
Commodity price index | −0.005 | 0.0139*** | 0.009*** | 0.0001 |
(0.005) | (0.004) | (0.002) | (0.0004) | |
Net foreign assets (% of GDP) | 2.893 | −0.423 | 2.064*** | −0.146** |
(1.957) | (0.538) | (0.715) | (0.064) | |
Openness of trade | 0.042*** | 0.036*** | 0.011 | 0.066*** |
(0.013) | (0.011) | (0.008) | (0.002) | |
de jure capital openness | −1.114 | 0.981 | −4.499 | −0.856* |
(3.749) | (2.139) | (4.094) | (0.153) | |
Exchange rate stability index | 1.517* | −2.079** | −0.712* | −3.200*** |
(1.084) | (1.294) | (1.369) | (0.230) | |
Sargan test (p value) | 0.231 | 0.185 | 0.217 | 0.280 |
Hansen J test (p value) | 0.273 | 0.168 | 0.236 | 0.260 |
Diff-in-Hansen test (p value) | 0.183 | 0.151 | 0.179 | 0.231 |
A–B test AR(1) (p value) | 0.056 | 0.021 | 0.000 | 0.014 |
A–B test AR(2) (p value) | 0.483 | 0.458 | 0.478 | 0.479 |
Observations | 837 | 992 | 1457 | 3286 |
Number of countries | 27 | 32 | 47 | 106 |
6.3.1 Difference GMM estimation
6.3.2 System GMM estimation
7 Robustness
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Developed | Emerging | Developing | Full sample | |
Lag CAB (% of GDP) | 0.684*** | 0.384*** | 0.615*** | 0.404*** |
(0.039) | (0.004) | (0.031) | (0.0009) | |
Real GDP growth rate | −0.156*** | 0.661*** | −0.0389*** | 0.366*** |
(0.023) | (0.035) | (0.009) | (0.002) | |
∆ REER | −0.0157*** | −0.059*** | −0.0008 | −0.003*** |
(0.004) | (0.003) | (0.001) | (0.0006) | |
Commodity price index | −0.003 | 0.0005 | 0.006*** | 0.002*** |
(0.004) | (0.004) | (0.001) | (0.0004) | |
Openness of trade | 0.007 | 0.164*** | 0.002 | 0.073*** |
(0.011) | (0.038) | (0.006) | (0.001) | |
de facto capital openness | −0.0002 | −0.004*** | −0.004** | −0.007** |
(0.0004) | (0.0003) | (0.001) | (0.0002) | |
Exchange rate stability index | 6.611** | −0.418 | −0.035 | −2.405*** |
(3.073) | (1.917) | (1.196) | (0.168) | |
Asian crisis dummy | 12.25 | −22.37* | – | 0.855 |
(7.649) | (12.63) | – | (1.114) | |
Sargan test (p value) | 0.121 | 0.191 | 0.214 | 0.192 |
Hansen J test (p value) | 0.172 | 0.178 | 0.227 | 0.219 |
A–B test AR(1) (p value) | 0.032 | 0.041 | 0.004 | 0.001 |
A–B test AR(2) (p value) | 0.483 | 0.482 | 0.490 | 0.477 |
Observations | 837 | 992 | 1457 | 3286 |
Number of countries | 27 | 32 | 47 | 106 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Developed | Emerging | Developing | Full sample | |
Lag CAB (% of GDP) | 0.798*** | 0.400*** | 0.639*** | 0.405*** |
(0.031) | (0.007) | (0.028) | (0.0006) | |
Real GDP growth rate | −0.215*** | 0.798*** | −0.028** | 0.458*** |
(0.018) | (0.033) | (0.012) | (0.004) | |
∆ REER | −0.014*** | −0.091*** | −0.004** | −0.008*** |
(0.004) | (0.011) | (0.002) | (0.001) | |
Commodity price index | −0.005 | 0.009*** | 0.007*** | −0.004*** |
(0.003) | (0.003) | (0.001) | (0.0005) | |
Openness of trade | −0.004 | 0.042*** | −0.003 | 0.084*** |
(0.025) | (0.008) | (0.005) | (0.002) | |
de facto capital openness | 0.0001 | −0.002*** | −0.004*** | −0.006*** |
(0.0006) | (0.0001) | (0.001) | (0.0001) | |
Exchange rate stability index | 1.081 | −4.948** | 0.304 | −2.937*** |
(1.683) | (1.925) | (1.034) | (0.135) | |
Asian crisis dummy | 10.54* | −2.253* | – | 0.684 |
(6.071) | (18.74) | – | (0.612) | |
Sargan test (p value) | 0.193 | 0.214 | 0.197 | 0.221 |
Hansen J test (p value) | 0.172 | 0.178 | 0.227 | 0.219 |
Diff-in-Hansen test (p value) | 0.138 | 0.163 | 0.211 | 0.194 |
A–B test AR(1) (p value) | 0.024 | 0.011 | 0.007 | 0.004 |
A–B test AR(2) (p value) | 0.583 | 0.582 | 0.590 | 0.577 |
Observations | 837 | 992 | 1457 | 3286 |
Number of countries | 27 | 32 | 47 | 106 |