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.

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.

• Item Type: MPRA Paper
• Institution: Universiti Malaysia Sarawak
• Language: English
• Keywords: Current Account; Present Value Model; Consumption Smoothing; Consumption Tilting
• Subjects: F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity

References

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