Current account: mean-reverting or random walk behavior?
This paper sets out to investigate the statistical properties of current account in the crisis-affected countries of East Asian (Asian-5: Indonesia, Korea, Malaysia, the Philippines and Thailand) utilizing data from 1976Q1 to 2001Q4. We split the full sample period into two sub-periods of the pre-c...
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| Main Authors: | , , |
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| Format: | E-Article |
| Published: |
North-Holland
2006
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| Subjects: | |
| Online Access: | http://ir.unimas.my/id/eprint/7147/ http: www.elsevier.com/locate/econbase |
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| Institution: | Universiti Malaysia Sarawak |
| Summary: | This paper sets out to investigate the statistical properties of current account in the crisis-affected
countries of East Asian (Asian-5: Indonesia, Korea, Malaysia, the Philippines and Thailand) utilizing data from 1976Q1 to 2001Q4. We split the full sample period into two sub-periods of the pre-crisis (1976Q1–1996Q4) and post-crisis (1997Q1–2001Q4) eras. Univariate unit root tests indicate that current account follows a non-stationary process under both eras. However, using more sophisticated panel techniques revealed that the current account displays mean-reverting property in all three
sampling periods. Meanwhile, deviations of half-life estimates in the full sample period (post-crisis) were found to be much more rapid compared to the pre-crisis period. Our major conclusions are first, the empirical evidence supports the modern intertemporal approach to current account. Second, the results reveal that the Asian-5 current accounts were on a sustainable path, even during the pre-crisis period, hence, questioning the notion that the East Asian financial crisis was due to the mismanagement of external imbalances. |
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