Munich Personal RePEc Archive

Accounting for the Current Account Behavior in ASEAN-5

Lau, Evan and Baharumshah, Ahmad Zubaidi and Habibullah, Muzafar Shah (2007): Accounting for the Current Account Behavior in ASEAN-5.

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Abstract

Current account are an endogenous variable that contain information about the behavior of the economics agents and is important for economic policymaking as it gives a broad reflection of the stance of macroeconomics policies. The imbalances in current account are a reflection of the forward-looking, dynamic saving and investment decisions in the intertemporal approach to current account modeling. This study empirically analyzed the anatomy of the dynamic current account behavior for the ASEAN-5 countries using present value model. Despite the simplicity, the statistical computations suggest that the agents behave as the forward-looking rational agents in the face of the shocks in the three out of five economies. This implies that the current account acts as a buffer to smooth the consumption in the presence of shock and optimally smoothing its consumption path for these countries.

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