Publicação
Volatility and the current account : extending the evidence
| Resumo: | Consistent with standard theoretical priors, generally based on the precautionary saving motive, the empirical literature has documented that increased macroeconomic volatility is associated with improvements in the current account balance in advanced economies. Using an updated and extended data set, we first confirm this relationship, but also show that it does not hold in developing economies, where macroeconomic volatility is not systematically associated with changes in the current account balance. When we explore potential mechanisms for this asymmetry, we find evidence in favor of precautionary saving in both groups of countries, which allows us to rule this out as the reason behind the observed difference in the currentaccount/ volatility relationship. |
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| Autores principais: | Jalles, João Tovar |
| Outros Autores: | Karras, Georgios |
| Assunto: | current account uncertainty volatility |
| Ano: | 2022 |
| País: | Portugal |
| Tipo de documento: | working paper |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório da Universidade de Lisboa |
| Resumo: | Consistent with standard theoretical priors, generally based on the precautionary saving motive, the empirical literature has documented that increased macroeconomic volatility is associated with improvements in the current account balance in advanced economies. Using an updated and extended data set, we first confirm this relationship, but also show that it does not hold in developing economies, where macroeconomic volatility is not systematically associated with changes in the current account balance. When we explore potential mechanisms for this asymmetry, we find evidence in favor of precautionary saving in both groups of countries, which allows us to rule this out as the reason behind the observed difference in the currentaccount/ volatility relationship. |
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