Current-Account Reversals in Developing Countries: The Role of Fundamentals

Alberto Bagnai, Stefano Manzocchi
1998 Social Science Research Network  
Useful comments from F. Carlucci, M. Fratianni and an anonymous referee are gratefully acknowledged; this research was partially supported by a grant from MURST (40% Ateneo funds). Abstract -This paper studies episodes of current-account reversal in developing countries (DCs) in the period 1965-1994. First, a number of persistent shifts ("reversals") in the currentaccount balance dynamics are identified by structural break and segmented trend tests; then, the relationship between these
more » ... and a set of fundamentals suggested by the intertemporal approach to the current account is investigated in a panel-data set-up. We find that fundamentals play a different role in episodes of persistent deterioration or improvement of the current-account balance in DCs.
doi:10.2139/ssrn.139048 fatcat:scmjh7kfi5d3fotnrjtm7qzagi