Current account

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Determinants of the current account for a group of European countries

Determinants of the current account for a group of European countries

Numerous existing works related to the analysis of the variables of the current account, but in this case we decided to focus on six countries whose historical current account balances are very different. Thus we wanted to determine which variables influence the final balance to get the current account of each of the countries and therefore an explanation of the diversity of the results of the current accounts of European countries considered as homogeneous economies mostly. To carry out this work we have relied on some of the economic works done
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41 Lee mas

The intertemporal approach to the current account: evidence from Argentina

The intertemporal approach to the current account: evidence from Argentina

As we have already mentioned, the simpler intertemporal current account model considers a constant interest rate which was generally fi xed between 2% and 6% (Sheffrin and Woo, 1990a; Ghosh, 1995; Suarez Parra, 1998, McDermott et al., 1999). On the other hand, since the real interest rate in the model considered here is not held fi xed, the question then arises of how to construct an interna- tional real interest rate to conduct the analysis The traditional view consists of building an ex-ante interest rate following the method of Barro and Sala i Martin (1990). This method consists of collecting data on nominal interest rates and in fl ation (calculated from the consumer price index) for the G-7 economies. The expected in fl ation is calculated as a forecast using an ARMA model. The nominal interest rate in each country is then adjusted by inflation expectations to compute an ex-ante real interest rate. An average real interest rate is then computed using time-varying weights for each country based on its share of GDP in the G-7 total. We do not follow this procedure since in our view it does not seem to be applicable to a case like Argentina, that will usually pay a by far greater rate if it has access to the international fi nancial market and will display far more volatility than the G-7 rate. Unfortunately, a series does not exist for the cost of capital in the international fi nancial market for a country like Argentina. In such an event, even if it is not entirely satisfactory, we pre- fer to use an internal interest rate to the alternative of using an international interest rate as stated above. 8
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How well can the New Open Economy Macroeconomics explain the exchange rate and current account

How well can the New Open Economy Macroeconomics explain the exchange rate and current account

All data are seasonally adjusted quarterly series at annual rates for the period 1973:1e 2000:4, obtained from International Financial Statistics. The exchange rate for each country is measured as the bilateral rate with the U.S. dollar. The current account is measured as GNP less expenditure on consumption, investment, and government purchases. Output is mea- sured as national GDP, the domestic price level as the CPI, and the interest rate as a treasury bill rate or something similar. 10 Foreign aggregate variables are computed as a geometric weighted average, where time-varying weights are based on each country’s share of total real GDP. Series other than the current account are logged. Because the steady state value of the current account in the theoretical model is necessarily zero, this variable cannot be expressed in the model in a form that represents deviations from steady state in log form. Instead the current account is scaled by taking it as a ratio to the mean level of output.
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27 Lee mas

Current account sustainability in Central and Eastern Europe: structural change and crisis

Current account sustainability in Central and Eastern Europe: structural change and crisis

Analysis of current account sustainability has been the focus not only of policy studies but also of academic studies since the Great Recession and the debt crisis that a number of European countries suffered as a consequence (Cuestas and Staehr 2013, Cuestas et al. 2014). This analysis is relevant given that basic macroeconomics predicts that an increase in the current account deficit will come at the expense of an increase in the public deficit or a reduction in private saving over investment.

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The Intertemporal Approach to the Current Account: Evidence for Chile

The Intertemporal Approach to the Current Account: Evidence for Chile

In this intertemporal approach, it is also possible to measure the external sustainability of the current account, an issue that has major importance for many countries. Evaluating whether the current account deficit of a country is sustain- able is, however, a hard task as discussed in Milesi-Ferreti and Razin (1996). Sustainability is related with solvency. An economy is solvent if the present dis- counted value of future trade surpluses equals current external indebtedness; this is satisfied when the country meets its intertemporal budget constraint. The prac- tical applicability of this theoretical definition is reduced by the fact that it relies on future events and policies. 1 Hence the relevance of the notion of sustainability;
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28 Lee mas

Fiscal Policy, the Current Account, and the Twin Deficits Hypothesis

Fiscal Policy, the Current Account, and the Twin Deficits Hypothesis

Fratzscher and Müller (2010), among others. Evans (1988) studied the relation between budget and current account de…cits for the major industrialized countries (the United States, Canada, France, Germany and the U.K.) and found no relationship consistent with the Ricardian hypothesis that the budget de…cit is not related to the current ac- count de…cit. Erceg et al. (2005) found that …scal de…cits have a small e¤ect on the US trade balance, irrespective of whether the source is a spending increase or a tax cut. Kim and Roubini (2008) pointed out that output shocks, more than …scal shocks, appear to drive the co-movements of the current account and the …scal balance, and suggest- ing the existence of a "twin divergence" rather than "twin de…cits". They estimated a VAR model and found that a government de…cit shock improves the current account and depreciates the real exchange rate in the short run. This improvement in the current account is explained by an increase in private saving and a fall in investment. Bussière et al. (2010), studied the e¤ect of productivity shocks and budget de…cits on the current account, introducing non-Ricardian agents. They obtain that a deterioration in public savings by 1 percentage points of GDP will lower the current account by 0.14 percentage points of GDP.
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26 Lee mas

Fiscal policy, the current account, and the twin deficits hypothesis

Fiscal policy, the current account, and the twin deficits hypothesis

Relationship between …scal policy and the current account. Traditional view suggests that a …scal expansion should lead to a worsening in the current account, contrary to the Ricardian view, in which there is no systematic relationship between budget and current account de…cits.

40 Lee mas

From conceptual to logical ETL design using BPMN and relational algebra

From conceptual to logical ETL design using BPMN and relational algebra

The implementation in RA of the process described in the running example, is shown in Fig. 5. Variable Temp0 holds all tuples except for the ones with ActionType =‘NEW’, and Temp1 holds the tuple pointed to by a cursor from Temp0 at any particular time. For the sake of space, only the part concerning SCDs will be explained (Eqs. 13 through 24). Equations 13 and 14 obtain the Sk CustomerID of the current customer tuple in DimCustomer, and rename it to Sk CustomerIDOLD, to keep the current surrogate key of DimCustomer in the flow, for the reasons already explained. Equations 15–16 add Sk CustomerID to the flow (the new surrogate key value is computed by adding 1 to the maximum Sk CustomerID value in DimCustomer). The corresponding current tuple in Dim- Customer is then “deleted” (Eq. 17). Then, the remaining columns needed are added (Eq. 18), and the tuple is inserted into DimCustomer (Eq. 19). After this, all current accounts of the customer are obtained (Eq. 20) and “deleted” (by setting, e.g., IsCurrent as ‘False’, in Eq. 21). Again, only one tuple is inserted, for accounts such that EffectiveDate = ActionTS. For accounts with EffectiveDate = ActionTS, only their Sk CustomerID values are updated (Eq. 22). Finally, Eq. 23 adds Sk AccountID to the flow. This is the maximum Sk AccountID in DimAc- count plus the rownumber() value of each current account tuple. Finally, the tuples are inserted into DimAccount (Eq. 24).
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11 Lee mas

Mart´ın Uribe3 First draft, Fall 1998 Last updated: June 25, 2014

Mart´ın Uribe3 First draft, Fall 1998 Last updated: June 25, 2014

In addition to the Reagan and Obama fiscal expansions, two other episodes stand out. One is the enormous albeit short-lived fiscal deficit during the second world war of about 12 percent of GDP, caused primarily by military spending (see the bottom left panel of figure 7.1). During this period, the current account did deteriorate from about 1 percent to -1 percent of GDP. This movement in the external account is in the direction of the twin-deficit hypothesis. However, the observed decline in the current account balance was so small relative to the deterioration in government savings, that the episode can hardly be considered one of twin deficits. Another noticeable change in the fiscal balance took place in the 1990s during the Clinton admin- istration. Between 1990 and 2000, government savings increased by about 7 percentage points of GDP. At the same time, contrary to the twin-deficit hypothesis, the current account deteriorated by about 4 percent of GDP. In summary, over the past century large changes in government savings have not always been accompanied by equal adjustments in the current account.
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391 Lee mas

Essays on Fiscal Policy in Developing Countries and Microstates

Essays on Fiscal Policy in Developing Countries and Microstates

as well as time effects. The results are very similar to the benchmark model that allows for only country fixed effects. The next specification excludes oil exporting countries. Here, the coefficients for CAPB weaken to 0.28 and 0.31 for the global sample and mi- crostates, respectively. This is not surprising given that oil price shocks typically induce large comovements in public sector balances, through oil revenues, and the current account, through oil exports, in oil-exporting countries. In addition, we estimated the baseline model using a pooled OLS regression and a dynamic panel data model, where the lagged variable of the current account is included as an explanatory variable. The results are similar to those obtained from the benchmark model. We also restricted the sample to a more recent period (1990–2009) and estimated the benchmark model using different estimation methods (See Table 4.7 and 4.8). Overall, our main results seem to hold.
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101 Lee mas

OECD ECONOMIC OUTLOOK

OECD ECONOMIC OUTLOOK

fairly resilient in France and more clearly so in Spain and several smaller economies. This contrasted starkly with Germany and especially Italy, where over the past two quarters activity has been contracting at an annualised rate of close to 2%. Paradoxi- cally, real GDP and total domestic demand continued to follow similar paths in France and in the United Kingdom, whereas divergence amongst the largest mem- bers of the common currency area tended to increase (Figure I.2 above). Private con- sumption held up well in France in the course of 2004, partly thanks to a decline in the household saving rate, which may have been facilitated by sizeable housing wealth gains. In Germany, where for many years house prices have been falling steadily, the saving rate increased and consumption was weaker, against the backdrop of a lacklustre labour market (see Box I.2). As a consequence, domestic demand stagnated, and the modest growth in real GDP in 2004 was fully accounted for by foreign trade, reflecting a sharp acceleration of exports, driven to a significant degree by market share gains. This was accompanied by a further widening of the current account surplus, to over 3½ per cent of GDP (coming from a deficit of 1½ per cent of GDP in 2000). In Italy instead, the drag exerted by anaemic domestic demand was compounded by eroding competitiveness, associated inter alia with insufficient ser- vice sector deregulation. Indeed, over the past five years, Italy’s cumulative loss of competitiveness has approached 25% (Figure I.3). 5
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224 Lee mas

Macroeconomic fluctuations and bank behavior in Chile

Macroeconomic fluctuations and bank behavior in Chile

in this section we describe the results of an event study in which we examined banking behavior during a window of 12 months following the policy changes enacted in 1998, in particular during the third quarter. As mentioned earlier, the Asian crisis impacted Chile’s economy through a sharp fall of commodity prices and a sudden stop in capital flows, as a shift occurred toward presumably safer markets in the developed world. Both shocks created tremendous pressure on the exchange rate, which had been managed inside a band at the time. in response to this pressure, policymakers introduced a substantial interest rate hike (600 basis points) following a decrease in Gdp growth and a sizable current account reversal. important institutional reforms followed, including a shift to a free float, the opening of the capital account, and the adoption of a fully fledged inflation targeting framework,
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36 Lee mas

Borio, C. y P. Disyatat (2011), “Global imbalances and the financial crisis: Link or no link?”, BIS Working Paper, No. 346.

Borio, C. y P. Disyatat (2011), “Global imbalances and the financial crisis: Link or no link?”, BIS Working Paper, No. 346.

Global current account imbalances and the net capital flows they entail have been at the forefront of policy debates in recent years. In the wake of the financial crisis, many observers and policymakers have singled them out as a key factor contributing to the turmoil. 3 A prominent view is that an excess of saving over investment in emerging market countries, as reflected in corresponding current account surpluses, eased financial conditions in deficit countries and exerted significant downward pressure on world interest rates. In so doing, this flow of saving helped to fuel a credit boom and risk-taking in major advanced economies, particularly in the United States, thereby sowing the seeds of the global financial crisis. This paper argues that such a view, henceforth the excess saving (ES) view, and its focus on saving-investment balances, current accounts and net capital flows bears reconsideration. The central theme of the ES story hinges on two hypotheses, which appear to various degrees in specific accounts: (i) net capital flows from current account surplus countries to deficit ones helped to finance credit booms in the latter; and (ii) a rise in ex ante global saving relative to ex ante investment in surplus countries depressed world interest rates, particularly those on US dollar assets, in which much of the surpluses are seen to have been invested. Our critique addresses each of these hypotheses in turn.
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43 Lee mas

Serie documentos de trabajo

Serie documentos de trabajo

We test the robustness of our benchmark case in tables 2 through 5. Table 2 shows the effects of including two additional variables that have often been mentioned as likely determinants of currency crises, namely, fiscal balance and credit boom. The latter is defined as a dummy variable that takes the value of 1 when bank credit to the private sector (as a share of GDP) grows more than 50 percent in the previous three-year period. It takes the value of 0 otherwise. Neither of these variables turns out to be statistically significant nor they had they any influence on the significance or magnitude of our benchmark coefficients. We tried alternative definitions of the credit boom variable (different thresholds and/or credit in real terms), and none of them worked well. These results suggest that these two variables add no extra information to that already embodied in our benchmark explanatory set of variables. It seems as if the effects of the fiscal balance are better captured by either the seignorage rate and/or by the current account balance. On the other side, the credit boom impact on the likelihood of a crisis may be captured by the current account variable, as we have speculated in another paper (Esquivel and Larrain, 1999a).
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46 Lee mas

The fiscal adjustment after the 2001 02 crisis in Argentina

The fiscal adjustment after the 2001 02 crisis in Argentina

From 1998 on, the main counterpart of the current account deficit (that is, the Rest of the World surplus) was the fiscal deficit, as can be seen in Graph 1. But this factor does not imply that fiscal austerity measures will automatically correct the external sector imbalance. Accountability warrants that the sum of sectoral surpluses (or deficits) has to be zero by necessity, but this in no way can guarantee what the effects of measures conceived to reduce the deficit of one of the aggregate sectors will be.

8 Lee mas

OECD ECONOMIC OUTLOOK: SPECIAL FOCUS ON FISCAL POLICY AND INSTITUTIONS

OECD ECONOMIC OUTLOOK: SPECIAL FOCUS ON FISCAL POLICY AND INSTITUTIONS

for current account balances at the central bank was raised by ¥ 5 trillion, to a range of ¥ 22 to 27 trillion in April 2003 and further to ¥ 27 to 30 trillion in May, with the upper bound boosted again to ¥ 32 trillion in October. The May action was prompted by a serious shortage of capital in the fifth largest private bank. The Bank of Japan’s response, together with the injection of public funds into the bank, maintained stabil- ity in financial markets. The Bank’s decision to broaden the range of assets that it purchases to include securities backed primarily by receivables held by, or loans to, small and medium-sized enterprises, is likely to increase financing for smaller firms and enhance the effectiveness of quantitative easing. The stabilisation of the the headline consumer price index has raised concern about a possible change in mone- tary policy, prompting the Bank of Japan to clarify that it will only change its current policy when inflation remains zero or positive for a sustained period and the risk of falling back into deflation has become negligible. Active intervention in the foreign exchange market has also had an important impact by preventing a significant appre- ciation of the yen until mid-September, effectively supporting profits and further boosting the monetary base.
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257 Lee mas

Was fiscal irresponsibility the cause behind the Latin American crises?

Was fiscal irresponsibility the cause behind the Latin American crises?

rule is altered (i.e. the exchange rate risk). From the viewpoint of the individual investor, engaging in external borrowing to exploit an arbitrage opportunity has no significant effect on the sustainability of the exchange rate rule. However, since the first movers are exploiting significant benefits, other players have strong incentives to jump in, even when by doing so their combined actions may have negative macroeconomic consequences. The macroeconomic effect of financial arbitrage/speculation is where all the action happens. Capital inflows expand liquidity and credit in the economy. As a result, domestic interest rates and spreads fall, and output and employment grow. The expansion of aggregate demand leads to increases in non-tradable prices, which under fixed or predetermined exchange rate regimes generate a RER appreciation. The real appreciation can be reinforced by the effect of inertial inflation arising from backward-looking behaviors and contracts, as typically happens with stabilization programs. The combined effect of the RER appreciation and higher economic growth worsens the current account. This gradually weakens the credibility of the exchange rate rule. As the probability of exchange rate devaluation increases, the risk premium and the domestic nominal interest rate also increase. The balance sheet of the domestic financial system - which is short on foreign currency and long in local assets- becomes increasingly fragile as the interest rate increases. Capital inflows are retained by the increase in the domestic interest rate; however, there eventually comes a point at which no interest rate can attract new external financing. Capital outflows end up forcing the central bank to abandon the exchange rate rule. The final outcome is a sequential or simultaneous twin (financial and external) crisis.
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8 Lee mas

Sustainability of external imbalances in the OECD countries

Sustainability of external imbalances in the OECD countries

The problem of global external disequilibria relates in turn to the current international financial crisis, as discussed at length in Obstfeld and Rogoff (2010). Regarding the case of the European Union (EU), those countries with the highest current account disequilibria are those that have experienced a greater fall in their levels of domestic demand (Lane, 2010). Moreover, it has been argued that for these countries, usually the eurozone members with lower income levels, borrowing in international markets would have become easier before the beginning of the crisis. In fact, the greater financial integration, together with the adoption of the euro, would have meant a reduction in the cost of capital and the disappearance of exchange rate risk. As a result, this would have translated into both a decrease in saving and an increase in investment, and hence into a deterioration of the current account balance (Blanchard and Giavazzi, 2002). Even more, the prospects of convergence as regards the richer countries would have favour growth expectations in those countries, which contributed additionally to greater deficits; see Lane (2010). However, unlike the case of the US, where the size of the external deficit has led to a wide academic debate [see, e.g., Mann (2002), Blanchard, Giavazzi and Sa (2005), Edwards (2005) or Obstfeld and Rogoff (2007)], this has not been the norm in the European case, with a predominance of descriptive studies of a limited analytical content.
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Chapter 25 Electric Current and Direct-Current Circuits

Chapter 25 Electric Current and Direct-Current Circuits

Picture the Problem When the switch is closed, the initial potential differences across the capacitors are zero (they have no charge) and the resistors in the bridge portion of the circuit are in parallel. When a long time has passed, the current through the capacitors will be zero and the resistors will be in series. In both cases, the application of Kirchhoff’s loop rule to the entire circuit will yield the current in the circuit. To find the final charges on the capacitors we can use the definition of capacitance and apply Kirchhoff’s loop rule to the loops containing two resistors and a capacitor to find the potential differences across the capacitors.
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120 Lee mas

A characterization on hybrid lead halide perovskite solar cells with Ti02 mesoporous scaffold

A characterization on hybrid lead halide perovskite solar cells with Ti02 mesoporous scaffold

The current density-voltage characterization constitutes a fundamental tool for understanding the solar cells operation; and its performance under standard illumination conditions (air mass (AM) 1.5, 100 mW cm −2 irradiance) 54 is the established method for measuring the solar to electricity power conversion efficiency. Typically, a bias is applied across the device terminals sweeping the proper voltage range while current through an external circuit is been measured in a steady-state power output condition. However, it seems that such steady-state power output condition is not so easy to hold for MAPI based solar cells. The curves itself has been the focus of a lot of discussion due to its characteristic anomalous hysteretic behavior whose identification, 55 description and understanding have been tackled in several studies. In this sense, H.J. Snaith et al. 53 found that the scan direction and rate at which the bias is swept and the specific device architecture severely modify the curve shape, and proposed three possible explanations: (i) filling and emptying of trap states, (ii) ferroelectric effect, and/or (iii) migration of excess ions, as interstitial defects (iodide or methylammonium). H.S. Kim and N.G. Park 56 pointed the increase of the crystal size of MAPI and the presence of mesoporous TiO 2 film as alleviating factors for the
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